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VAT
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VAT

Consumption tax on most goods and services; the UK standard rate is 20%.

VAT is a tax on spending that registered businesses ADD to the price of most goods and services and pay to HMRC. The UK standard rate has been 20% since 4 January 2011; Chancellor John Healey ruled out raising it on 7 September 2026.

Last refreshed: 7 October 2026 · Appears in 1 active topic

Timeline for VAT

#4 28 Sept

Ruled out of any rise by Chancellor John Healey on 7 September

Is Britain Actually Broke?: Mentioned in: Healey rules out three big tax rises
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Background

VAT is the UK's third-largest tax, behind income tax and National Insurance contributions. The Office for Budget Responsibility expects it to raise about £180bn in 2025-26, roughly 15% of all receipts. On 7 September 2026 Chancellor John Healey ruled out raising VAT, income tax or corporation tax ahead of his first Budget on 28 October.

The standard rate of 20%, in force since 4 January 2011, covers most goods and services. A reduced rate of 5% applies to items such as home energy and children's CAR seats, and a zero rate to most food and children's clothes. Some supplies, including financial transactions and postage stamps, are exempt. A business must register once its taxable turnover over the previous 12 months passes £90,000, the threshold since 1 April 2024.

Governments elsewhere in Europe move VAT rates in both directions. Bruegel reported on 5 May 2026 that about €8.3bn of the more than €11bn European governments had committed to energy-price relief went on untargeted VAT and excise cuts. In June Spain's government announced plans to raise VAT on tourist flats from 10% to 21%.

Common Questions
What is the VAT rate in the UK?
The standard rate is 20%, in force since 4 January 2011. A reduced 5% rate covers items such as home energy, and a zero rate covers most food and children's clothes.Source: https://www.gov.uk/vat-rates
When does a business have to register for VAT?
When its taxable turnover over the previous 12 months goes over £90,000. The threshold rose from £85,000 on 1 April 2024.Source: https://www.gov.uk/government/publications/vat-increasing-the-registration-and-deregistration-thresholds/increasing-the-vat-registration-threshold
Will VAT go up in the October 2026 Budget?
Chancellor John Healey ruled out raising VAT, income tax or corporation tax in a speech on 7 September 2026, ahead of his Budget on 28 October.Source: Lowdown event 6219
How much money does VAT raise in the UK?
About £180bn in 2025-26 on the Office for Budget Responsibility's estimates, around 15% of all receipts. Only income tax and National Insurance raise more.Source: https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/vat/
Who collects VAT in the UK?
HMRC. VAT-registered businesses charge it on their sales and pay it over to HMRC.Source: https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/vat/
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