No, VAT (Value Added Tax) is not paid on everything. While it applies to most goods and services at a standard 20% rate in the UK, many items are reduced-rated (5%), zero-rated (0%), or fully exempt. Examples of exemptions or zero-rated items include children’s clothes, books, newspapers, and, in many cases, food, healthcare, and education.
Goods and services that are 'out of scope'
goods or services you buy and use outside of the UK. statutory fees, like the London congestion charge. goods you sell as part of a hobby, like stamps from a collection. donations to a charity, if given without getting anything in return.
Essentially, almost anything your business sells will incur VAT unless it's specifically exempt from VAT. For example, HMRC guidance lists goods and services, equipment hire, asset sales, commissions, staff canteen sales, and barter/exchange transactions as taxable supplies.
Certain goods and services must be exempt from VAT (for example, postal services, medical care, lending, insurance, betting), and certain other items are exempt from VAT by default, but states may opt to charge VAT on them (such as land and certain financial services).
Frequently asked questions
Agricultural products, tuition fees, lending operations, real estate, books, transportation and other necessities are typically VAT-exempt transactions.
Navigating VAT obligations can be particularly complex for online businesses, especially those selling across borders. Common mistakes—such as failing to register in the correct countries, applying the wrong VAT rates, or missing important filing deadlines—can lead to serious financial and legal consequences.
VAT (Value Added Tax) is a tax added to most products and services sold by VAT -registered businesses.
Shipping your purchases home directly from the retailer is another way to avoid paying VAT, but the added cost may outweigh any savings. You can try to get your VAT refund through the mail but the process takes much longer and can be unreliable. Most people submit their requests at the airport on their way home.
VAT stands for 'Value Added Tax'. It is classed as a 'consumption tax' and placed on almost all sales of goods and services. This amount is then passed to HMRC as part of the business' VAT returns.
You cannot reclaim VAT for:
What items are eligible for a VAT refund? Typical Recoverable Expenses are:
Healthcare: Medical services, hospital care, and the supply of certain medical products may also be exempt from VAT. Financial services: Many financial services, like insurance and banking, are VAT-exempt. Charitable activities: Donations and activities carried out by registered charities may be exempt from VAT.
VAT is calculated based on your taxable turnover, not your profit. That means it applies to the total value of your VATable sales, regardless of your expenses or how much profit you actually make. Profit is relevant for income or Corporation Tax, but VAT is purely based on the value of goods or services sold.
The standard VAT rate is 20%. It applies to most goods and services. The reduced VAT rate is 5% — this applies to goods and services like some health products, fuel, heating and car seats for children. Zero-rated goods and services include most food, books and clothes for children.
VAT is a tax which is ultimately paid by the consumer, and is not a tax on individual businesses. VAT is typically included on business invoices.
VAT Tax by Country 2026
What is VAT Exempt in the UK? Breakdown of VAT Exempt and Zero-Rated Items
Here, we explore the most common VAT mistakes business owners make and how to avoid them.
Not all sales are liable to VAT. Some traders are not registered for VAT because their businesses have sales (turnover) below the VAT registration threshold and so they cannot charge VAT on their sales (unless they decide to register voluntarily – see the heading below: Voluntary registration).
The United States does not have a Value Added Tax (VAT) at either the federal or the state level. Sales and use taxation in the US is operated independently by each of the 50 states and the District of Columbia. Sales taxes are administered by every state except Alaska, Delaware, Montana, New Hampshire, and Oregon.
What triggers a VAT investigation? Although a VAT inspection can happen at any time, a VAT inspection is often risk-based. Such risks include: : Compliance history – does your business have a history of late payments or non-payment of VAT?
How to avoid a double payment of VAT? To avoid the UK customer paying the VAT twice when the consignment has a value of more than GBP 135, the solution that seems most obvious is simply not to charge VAT at the time of sale and let the carrier charge the VAT to the customer at the time of delivery.