UK VAT Guide for 2026: Rates, Registration & Compliance
The UK's standard VAT rate is 20%, with reduced 5% and 0% bands. This guide covers the £90,000 registration threshold, VAT on imports post-Brexit, digital-services rules, and Making Tax Digital filing.
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Key Takeaways
The UK's standard VAT rate is 20%, with a reduced 5% rate for domestic fuel and a 0% rate for most food, children's clothing, and books — and since Brexit the UK sits outside the EU VAT and OSS system (except Northern Ireland for goods). A UK-established business registers once taxable turnover exceeds GBP 90,000 over any rolling 12-month period (or expects to within 30 days); an overseas business with no UK establishment must register as soon as it makes taxable supplies, with no threshold. SaaS, apps, streaming, and downloaded software are taxable at 20% (e-books are zero-rated); financial services, insurance, and some property and education supplies are exempt.
Taxability Snapshot
SaaS
Taxable
Digital Goods
Taxable
Clothing
Zero-rated (children's)
Groceries
Zero-rated
Sales Tax Rates
The UK's standard VAT rate is 20%, applied to most goods and services. A reduced 5% rate covers domestic fuel and a few other items, and a 0% rate applies to most food, children's clothing, and books. HMRC administers VAT, and since Brexit the UK is outside the EU VAT and OSS system.
Rate | Applies to |
|---|---|
Standard 20% | Most goods and services |
Reduced 5% | Domestic fuel, children's car seats, others |
Zero 0% | Most food, children's clothing, books |
Registration & nexus threshold
The UK uses a VAT registration threshold rather than US-style economic nexus. A UK-established business must register once taxable turnover exceeds GBP 90,000 over any rolling 12-month period, or if it expects to exceed it in the next 30 days [2]. An overseas business with no UK establishment must register as soon as it makes taxable supplies in the UK, with no threshold [2]. Registration steps are in the How to Register section.
Filing frequency & deadlines
Most businesses file VAT quarterly through Making Tax Digital (MTD)-compatible software, with returns and payment due one month and seven days after the period ends. Digital record-keeping is mandatory for all VAT-registered businesses.
Exemptions
Most food, children's clothing, books, and newspapers are zero-rated. Financial services, insurance, and some property and education supplies are exempt. SaaS, apps, streaming, and downloaded software are taxable at 20%; e-books are zero-rated.
Penalties
Failure to register on time is treated as a "failure to notify" and penalized as a percentage of the potential lost VAT: up to 30% for non-deliberate failures (and nil if you tell HMRC unprompted within 12 months of the VAT falling due), 20% to 70% for deliberate failures, and 30% to 100% where deliberate and concealed [8]. A points-based regime penalizes repeated late returns, and interest accrues on late payments.
Sources
[2] GOV.UK — Register for VAT (GBP 90,000 threshold; overseas businesses nil threshold)
[7] GOV.UK — Disagree with a tax decision (statutory review; First-tier Tribunal)
[8] GOV.UK — Penalties for failure to notify (CC/FS11; Compliance Handbook CH72740)
Verified July 2026 against GOV.UK / HM Revenue & Customs guidance.
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