Value Added Tax (VAT) is a tax added to products and services by businesses who are VAT registered.
VAT registration is mandatory for UK businesses whose VAT taxable turnover is more than a certain amount.
It’s also possible to register for VAT voluntarily.
There are three levels of VAT:
- Standard (20%) for most products and services
- Reduced (5%) for some things, such as kids car seats and home energy
- Zero (0%) for items such as newspapers, children’s clothes and crash helmets.
VAT thresholds and rates are sometimes revised by the UK government.