VAT (Value Added Tax)

VAT is a common abbreviation for Value Added Tax. This tax is added onto the cost of most goods and services in the UK. The current VAT rate for most goods and services is 20%. If you are self-employed, you need to register for VAT if you earn over the threshold of £85,000* per annum.

Reasons to register for VAT:

• If you earn over £85,000* from self-employment (unless you provide VAT exempt services, such as training)
• If you want to claim back VAT that you’ve paid on your purchases (for example, VAT you would have paid when you bought the laptop you use for work)

VAT Exempt

VAT exempt means that you don’t have to either pay or charge VAT on a product or service. If you provide these services, you don’t need to register for VAT and charge VAT on them – even if you earn above the £85,000* threshold. If you purchase a VAT exempt product, you can’t claim VAT back from HMRC.

Here’s a list of common goods and services that are VAT exempt:

• Education and training
• Fundraising events
• Finance, like interest on loans or insurance
• Subscriptions or memberships

*From the 1st April 2024, the threshold will increase to £90,000.