VAT in the UK

VAT-exempt goods and services

Now, let’s explore items and services that are exempt from VAT in the UK. These are specific categories that don’t include Value Added Tax (VAT):

1. Healthcare services:
   • Medical treatments, doctor visits, and hospital services are exempt from VAT. This includes both public and private healthcare providers.
2. Education and training:
   • Educational services provided by schools, colleges, and universities are VAT-exempt. This covers tuition fees, textbooks, and educational materials.
   • Vocational training courses and apprenticeships also fall under this category.
3. Financial services:
   • Services provided by banks, insurance companies, and financial institutions are exempt. Examples include bank account management, insurance policies, and investment advice.
4. Insurance:
   • Insurance premiums (life insurance, health insurance, property insurance) are not subject to VAT.
   • However, some insurance-related services (such as legal advice related to insurance claims) may still attract VAT.
5. Postal services:
   • Basic postal services, including sending letters and parcels, are VAT-exempt.
   • Additional services like express delivery or registered mail may have VAT implications.

Keep in mind, the VAT exemption status may change depending on your situation and the type of transaction.

For accurate guidance, refer to the official rules or consider getting advice from the pros to make sure you’re following VAT regulations correctly. Stay in the know!

UK VAT registration and thresholds

The VAT registration threshold marks the point when businesses must sign up for VAT. If your total sales (excluding exempt goods and services) exceed this threshold or are expected to soon, you must register for VAT in the UK.

Currently, the VAT registration threshold is £85,000. As of April 2024, the threshold will be at £90,000 – but always double-check the latest figures on the official HMRC website.

UK VAT returns: a quick guide

Registered businesses in the United Kingdom must regularly file VAT returns. Here’s a quick overview:

• Frequency of filing: Most businesses file VAT returns quarterly (every three months). Some with lower turnover may qualify for annual returns.
• What to include in your VAT return: Your VAT return should cover sales (output tax) and purchases (input tax). Report the total VAT owed (output tax) and reclaimable VAT (input tax).
• Online filing: Use the HMRC online portal for submission. Ensure accuracy in sales, purchases, and owed VAT.
• Deadlines: Submit your VAT return and pay any due VAT by the deadline (usually one month and seven days after the VAT period ends). Late submissions may incur penalties.
• Adjustments: Make prompt adjustments for errors or omissions in previous returns to avoid penalties.
• Digital record-keeping: Maintain detailed transaction records. Digital record-keeping is crucial for accurate VAT reporting.

VAT on imports and exports

Importing goods? Paying VAT upon importation is your responsibility. But, when you’re exporting goods from the UK, they’re generally zero-rated for VAT – no VAT on export sales.

Imported goods and VAT:

• Typically charged at the same rate as if sold within the UK.
• Some items like art, antiques, and collectors’ items might have a reduced VAT rate.
• VAT-registered businesses have options:
  • Use postponed VAT accounting on their VAT Return, allowing them to declare and reclaim import VAT in one go.
  • Pay import VAT directly upon importation and later reclaim it as input tax.

Temporary imports:

• Importing goods temporarily (with plans to re-export within 2 years) lets you get relief from import duties
• If you later choose to release temporarily imported goods for general use in the UK, be prepared to pay duty, import VAT, and compensatory interest for specific goods

Exports and zero rating:

• Goods leaving the UK are seen as being used outside the country, making the supply of exported goods zero-rated if certain conditions are met
• No VAT is applied to exports from Great Britain to locations beyond the UK or from Northern Ireland to destinations outside the UK

Frequently asked questions about VAT in the UK