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.
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:
It’s really straightforward to register for VAT – simply visit the HMRC website to register.
If you’re self-employed, you only need to register for VAT if you earn over £85,000, below this it’s entirely optional. However, if you don’t register for VAT, you won’t be able to claim VAT back in turn.