To find out more, you can either watch our video or read about it below.
VAT is an indirect tax on spending and is charged on certain categories of goods and services sold in the UK. Certain types of good and services are exempt from VAT – the most common ones are
- Insurance and finance
- Education and training and
- Charity fundraising.
How much VAT do I pay?
For goods and services that are taxable there are 3 rates of VAT charged;
- Standard rate charged at 20% is the most common and covers supplies not specifically included in one of the other categories
- Reduced rate charged at 5% on for example children’s car seats and home energy costs
- Zero rated which as the name suggests is charged at 0% applies to for example non luxury food, children’s clothes, books and publications.
Do I have to pay the VAT to HMRC?
If you are an individual the answer is no, although you are paying VAT when you buy goods and services you are not directly responsible for paying it to HMRC.
If you operate a business with Vatable turnover greater than £85,000 in a 12 month period, the business is required to register for VAT.
The business must then charge VAT on items it sells at the appropriate VAT rate for the category of goods or services. This VAT is collected when payment is received from customers and accounted for to HMRC on a quarterly basis. The business must pay HMRC the net of the VAT on its sales after deducting the amount of any VAT it has paid on business purchases.
Any VAT due must be paid to HMRC within one month and 7 days of the end of the VAT quarter. If the business has paid out more VAT on purchases than it has received on its sales it can request a rebate payment from HMRC.
If you have any queries on any of the taxes, please get in touch with us. We’d love to help.