Want to know whether you need to charge VAT on postage you are sending out to customers? Watch our video to learn more.
Most of the videos we record are based on real questions we’ve been asked by clients or contacts. If we get it asked twice, it gets moved to the top of the queue.
And, in the last month, I’ve been asked twice about VAT on postage. It’s been clients who are charging postage to their customers, and want to know whether they need to add VAT or not.
Because, you see, stamps are exempt from VAT.
If you buy a stamp from the post office, there’s no VAT on that, which is why sometimes confusion arises over what to do if I’m charging postage to my customers.
Do I charge VAT to my customers?
As a general rule, you must add VAT to postage.
If you’re charging postage to your customers, it’s seen as a service and, therefore, there’s VAT on it.
Whether or not the Royal Mail, or the courier you use, charges postage to you is irrelevant. You must charge VAT.
What if I don’t charge my customers for postage?
But what if you don’t actually charge extra for postage? Do you include it in the price?
Well, if that’s the case, the postage is almost irrelevant. You’re just charging for the goods.
Therefore, if the goods have VAT on them, you charge VAT. If they goods don’t have VAT, you don’t charge VAT.
The postage is included in the price, and the VAT on the postage just follows the cost of the goods. You’ve charged zero for the postage so it doesn’t affect it.
I hope that’s useful. Like I say, it’s one of those questions we’ve been asked twice in the last few weeks so I guess other people are wondering too.
If you’d like to have a look at any of our other videos where we answer lots of these handy little questions on tax, take a look at our YouTube page and subscribe for more videos.