How can VAT affect my business?
- You may need to add VAT to your prices
- You will need to send that extra money to HMRC
- You can claim back any VAT that you’re charged on business supplies
How much is VAT
- 20% is the VAT rate for most goods and services
- 5% is applied to some health, energy, heating, and protective products and services
- 0% is applied to a range of products and services to do with health, building, publishing and kids’ clothing
VAT exemptions and out-of-scope sales
VAT does not apply to all products and services. Some things, such as insurance, antiques, arts, and educational training are exempt. Other things, like statutory fees, are out of scope (they sit outside the tax system). Being exempt or out of scope is different from charging 0% VAT.
How does VAT work?
The VAT on any item is designed to be paid by the consumer in the end, rather than by the businesses involved in its supply. Take this example:
VAT on imports
You’re generally required to pay VAT on goods that you import into the UK. That VAT will probably be added to the price when you pay customs. You can generally claim it back when submitting your VAT return.
VAT on exports
If you sell goods and services to customers within the EU, you’ll probably need to add export VAT. The rate will depend on what you’re selling and who you’re selling to.
Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.
Guide to VAT
Making a start with VAT? Don’t worry. It’s a little extra admin, but follow our guide and you’ll soon be on top of it.
- What is VAT and how much is it?
You’ve probably heard about VAT before – it stands for value-added tax and is added onto prices in the UK.
- Registering for VAT
Find out if your business needs to worry about VAT. And if so, learn how to register for VAT.
- Calculating VAT and issuing VAT invoices
If you’re a VAT-registered business you must add VAT to your prices. You also need to issue VAT invoices. Find out how.
- Claiming back VAT
VAT-registered businesses can claim back the VAT they pay on business expenses. Let’s learn how.
- Working out your VAT refund or payment
Working out VAT is simple maths. Keeping track of all your transactions is the tricky part. Let’s learn the process.
- VAT returns and due dates
Once you’ve registered for VAT, you’ll need to submit returns online regularly – and square up with HMRC. Here’s how.
- Tools and guides for your business
Now you know the ins and outs of VAT, but it can be tough to keep on top of it all. Xero’s got the resources to help.
Download the guide to VAT
Get your small business tax sorted. Fill in your details to get our full VAT guide as a PDF.