UK VAT 2026
VAT in the UK has rates of 20%, 5% and 0%, but for a foreign company, what is more important than the rate itself is where the goods are located, who is the importer and who has to settle the tax.
Before issuing an invoice or shipping goods, check whether the transaction is for England, Scotland or Wales, or Northern Ireland. VAT rules may vary for goods trade. Also, determine the customer's status, the platform's role, and the significance of the £135 limit. If you need a representative in the UK, check out our services: overseas VAT registration and overseas VAT returns.
VAT in the UK – what to check before your first sale?
British VAT is a consumption tax. Taxpayers report VAT due on sales and, if eligible, deduct VAT from purchases and imports. For a foreign company, the outcome depends primarily on the transaction model.
Basic rate
Applies to most goods and services unless the regulations provide for 5%, 0%, exemption or transactions outside the scope of VAT.
The threshold is not for everyone
£90,000 is the national registration threshold. It should not be treated as a general tax-free allowance for a non-UK company.
This is not a dismissal
The shipping limit determines how VAT is collected on some sales of goods shipped from outside the UK.
Two areas of analysis
For goods, analyze England, Scotland and Wales, and Northern Ireland separately. The prefix XI refers to the corresponding goods trade with the EU.
From our experience Taxenlight
We most often resolve situations where a company started with a rate or platform report, and only then checked the importer, warehouse, and delivery terms. In the UK, the order matters: first, the flow of goods and the parties' responsibilities, then the invoice, VAT number, and reporting.
UK VAT rates in 2026
The official VAT rates in the UK are 20%, 5%, and 0%. HMRC emphasizes that the applicable rate depends on factors such as the type of supply, the purchaser, the method of presentation, and the evidence required.
| Rate | Typical use | What to watch out for |
|---|---|---|
| 20% | Standard RateMost goods and services, including electronics, furniture, adult clothing and many professional services. | If there is no clear basis for preference, the standard rate is the starting point. |
| 5% | Reduced rateSelected benefits, e.g. some home energy, child car seats and certain mobility aids. | From June 25 to September 1, 2026, it also includes strictly defined children's meals and family tickets and attractions. |
| 0% | Zero rateIncludes most basic food, children's clothing, books, newspapers and selected passenger transport. | Exports can only benefit from 0% after meeting the conditions and collecting evidence of export. |
| Sick leave | Selected activitiesinclude certain financial, insurance, medical, educational services and some real estate transactions. | The lack of VAT due may result in a restriction of the right to deduct. |
| Out of scope | No UK VATFor example, a service where the place of supply is outside the UK. | This is not a 0% rate or an exemption. The accounting method depends on the type of transaction. |
Valid in 2026: 5% temporary preference
From 25 June to 1 September 2026, the 5% rate applies to qualifying children's meals, children's tickets to selected cultural events, and tickets to designated family attractions. Coverage depends on HMRC terms and conditions and does not automatically cover all catering, cultural, or leisure activities. See HMRC's announcement on the temporary 5% rate.
When is a transaction subject to UK VAT?
A British customer alone doesn't determine your VAT liability in the UK. First, determine the place of delivery of the goods or the place of provision of the service, and then check whether the seller, buyer, or platform is responsible for settling the tax.
Goods or services?
Classify the benefit and check whether any special rules apply.
Where is the goods?
Determine the location at the time of sale, the beginning of transport and the storage location.
Who is the customer?
Separate B2B from B2C and confirm buyer status and VAT number.
Who imports?
Compare contract, Incoterms, invoice and customs declaration.
Is the platform working?
Check if the online platform is recognized as a supplier for this transaction.
Great Britain or Northern Ireland?
For goods, determine whether the transaction is for England, Scotland or Wales, or Northern Ireland.
Great Britain and Northern Ireland – an important distinction
In the case of trade in goods, England, Scotland, and Wales, and Northern Ireland, must be analyzed separately. Generally, export and import rules apply to the movement of goods between England, Scotland, or Wales and the EU. For the corresponding Northern Ireland-EU trade in goods, specific rules and a number with the prefix XI apply. The protocol does not cover services, so the XI rules do not apply to every transaction with the UK.
UK VAT Scenarios for a Foreign Company
The obligation most often arises when a company has goods in the UK, imports them on its own behalf or makes a local delivery that is not billed by another entity.
| Model | What to check | Main VAT risks |
|---|---|---|
| UK warehouse | Where the goods are stored and who owns them before sale. | Local delivery from stock may require a VAT number from the first taxable sale. |
| Import and resale | Importer, EORI, customs clearance, import VAT and invoice after import. | An inconsistent importer can block deductions and make it difficult to settle local sales. |
| Shipping up to £135 | Total shipment value, B2B/B2C, goods location and platform share. | VAT is collected at the point of sale; the limit does not constitute an exemption. |
| Marketplace | Whether the platform is a recognized provider for a specific transaction. | The platform does not automatically take over imports, direct sales or all flows. |
| B2B service | Place of performance, status of the acquirer and exceptions to the general rule. | Reverse charge can work, but not for every service. |
| Northern Ireland | Goods direction, number XI and relationship with the EU contractor. | Using GB rules or XI number for an incorrect transaction. |
When might a foreign company need to register for VAT in the UK?
A company not established in the UK can register without using the UK VAT threshold of £90,000. For a detailed obligation test, registration date, documents and procedure, please refer to our UK VAT Registration.
You should check your registration particularly if the goods are in the UK at the time of sale, you hold stock in a UK warehouse, you import stock in your own name, you supply with assembly or you provide a locally taxable service without the reverse charge applying.
HMRC advises that a non-UK company may be required to register, regardless of turnover, when it makes or intends to make supplies taxable in the UK. See the official VAT registration rules.
Don't wait for the threshold when:
- you sell goods from a warehouse in the UK,
- you import and sell locally,
- you send eligible shipments to consumers up to £135,
- you are carrying out delivery and installation in the UK,
- you have a local service that is not billed by the client,
- you operate in the Northern Ireland-EU trade in goods.
The full procedure has its own guide
VAT number, forms, documents and post-registration activities are described separately so that this article remains a map of the entire system.
Reverse charge in the UK
The reverse charge transfers the obligation to account for VAT from the seller to the buyer. For many B2B services provided by a foreign company, VAT is accounted for by the British recipient, but the outcome depends on the place of supply and exceptions.
Cross-border services
First, determine the place of supply. If it's in the UK and the conditions are met, the UK buyer can settle the tax.
Exceptions to the rule
Real estate, event admission, catering, transport and selected B2C services require separate analysis.
Domestic reverse charge
A separate mechanism operates, among others, for certain construction services, telephones, chips and parts of energy trading.
In practice we see
The most common mistake is the acronym "B2B = no UK VAT." This isn't enough. You need proof of the buyer's status, the correct place of supply rule, and a check for exceptions. HMRC's official guide to place of supply and the reverse charge.
Importing goods and import VAT in the UK
The importer is key to imports. They are responsible for the customs declaration and should have the documents necessary to settle import VAT. The EORI number, starting with GB, is used for customs clearance but is not a VAT number.
What to check before check-in?
- who is the importer in the contract and customs declaration,
- whether the company has the correct EORI number,
- who has the right to dispose of the goods,
- whether import is followed by local sale,
- whether the deduction will be based on PVA or C79 certificate,
- whether the customs agency details match the invoice and Incoterms.
Deferred settlement of import VAT
A UK-registered taxpayer can include import VAT on their UK VAT return instead of paying it upfront at import. This is officially known as Postponed VAT Accounting. Eligibility for deduction still depends on the importer's status, the business connection of the purchase, and documentation.
Taxenlight advises: £135 does not mean exemption
For qualifying goods located outside the UK, the limit applies to the value of the entire shipment. For direct-to-consumer sales, the seller generally collects VAT at the point of sale; for qualifying sales through an online platform, the platform may take over. Above £135, normal import rules revert. See HMRC rules for goods sold directly to UK customers.
UK VAT returns – the most important shortcut
Once registered, the taxpayer submits a UK VAT return, officially known as a VAT Return, for the period specified by HMRC, even if there have been no sales. Standard returns are quarterly, with the deadline usually falling one month and seven days after the end of the period.
UK VAT return
The declaration contains nine aggregated fields. We leave the detailed field map to the settlement guide.
Digital VAT settlement
In the Making Tax Digital system, the required data is entered digitally and the declaration is sent via compatible software.
Declaration and payment
These are two separate obligations. Simply submitting a VAT return does not automatically result in tax payment.
Already have a UK VAT number?
Deadlines, fields 1-9, nil declarations, corrections, payments and penalties are described in a separate guide.
VIES, Intrastat, OSS, IOSS and digital billing after Brexit
Don't automatically apply EU procedures to all sales to the UK. First, determine whether the goods are destined for England, Scotland, or Wales, or Northern Ireland, and check their physical destination.
VIES and number XI
The XI prefix is for the relevant Northern Ireland-EU trade. It is not a second, independent VAT number for all transactions.
Intrastat
It may apply to eligible movements of goods between Northern Ireland and the EU once the relevant thresholds are met.
OSS and IOSS
OSS may be relevant for sales of goods from Northern Ireland to EU consumers. IOSS applies to selected low-value import shipments.
Digital VAT settlement
The Making Tax Digital system applies to digital recording and submission of VAT returns. It does not replace transaction analysis or customs documentation.
The platform only settles specific transactions
The online platform may be considered a supplier for qualifying B2C sales, but the foreign company may still be responsible for the import of inventory, direct sales, the B2B portion, transfers, and VAT deduction. Compare the platform's report with orders, inventory, and clearance. See VAT rules for online platform sales.
Northern Ireland and the EU
HMRC indicates that a number with the prefix XI is used for qualifying trade in goods from the EU. See the VAT XI and OSS number rules for sales of goods from Northern Ireland to the EU .
Deduction and refund of UK VAT
A UK-registered business deducts eligible VAT on its UK VAT return. It requires a valid invoice or import document, and the expense must be used for the purposes of the business activity that qualifies for deduction.
Registered taxpayer
Deducts VAT in the declaration. With deferred settlement of import VAT, output and input tax can be included in the same declaration.
Company without registration
If it is not and should not be registered, it may, under certain conditions, use the VAT65A procedure.
Documentation
Check the invoice, importer, C79 or PVA statement, the relationship of the cost to the activity and any restrictions.
First, the right path to VAT recovery
The refund procedure does not replace mandatory registration. If you make supplies in the UK that trigger registration, the correct route for recovering VAT is generally a UK VAT return. HMRC describes the UK VAT refund for foreign businesses and form VAT65A.
The most common VAT errors in the UK
The most problems are caused by simplifications applied to the wrong model and the lack of consistency between the contract, platform, invoice and clearance.
Registration and sales
- waiting for GBP 90,000 despite no establishment,
- recognition of £135 for exemption,
- no distinction between England, Scotland and Wales and Northern Ireland,
- the assumption that the online platform settles everything.
Import and documents
- other importer in the contract and notification,
- deduction without C79 or PVA statement,
- confusing EORI with VAT number,
- 0% rate without proof of export.
Reverse charge and reporting
- automatic application of the reverse charge to all B2B sales,
- use of number XI for services,
- transferring OSS for sale to England, Scotland and Wales,
- manual rewriting of data, bypassing the requirements of digital records.
Taxenlight advises
On one page, outline: where the goods originate from, where they are at the time of sale, who imports them, where they are shipped, who the customer is, and who collects VAT. Then, compare this map with the contract, Incoterms, platform settings, invoice, and customs agency instructions. If the documents show different entities as the importer or seller, the settlement will be difficult to defend.
UK VAT 2026 – key takeaways
VAT in the UK is based on rates of 20%, 5% and 0%, but for a foreign company the result is determined by the location of the goods, the status of the customer, the importer, the platform and the distinction between England, Scotland and Wales and Northern Ireland.
First, the transaction model
Determine the flow of goods or place of supply, importer, customer and the role of the platform.
Don't put on thresholds
£90,000 does not automatically protect a non-established company and £135 is not VAT exempt.
Documents must be consistent
The contract, clearance, invoice, platform details and UK VAT return should describe the same model.
From Taxenlight experience
The cheapest time to get your UK VAT in order is before your first shipment. Reconstructing data from your warehouse, online platform, accounting system, and customs declarations later usually takes longer than correctly setting up sources and responsibilities at the beginning.
UK VAT 2026 – Questions and Answers
Quick answers to frequently asked questions about rates, registration threshold, shipping, reverse charge, OSS and VAT refunds.
The standard rate is 20%, the reduced rate is 5%, and the zero rate is 0%. There are also exemptions and activities outside the scope of VAT. The appropriate rate depends on the classification of the service and the terms of sale.
The billing currency is British Pounds Sterling (GBP). If the invoice is issued in a different currency, the data required for UK VAT settlement must be correctly converted and documented.
Rates are part of the UK VAT system. However, in goods trade, a distinction must be made between England, Scotland, and Wales and Northern Ireland. For the corresponding Northern Ireland-EU flows, special rules and the prefix XI apply.
Not always. A company without a UK establishment may be required to register from the first taxable supply. The £90,000 threshold primarily applies to businesses established in the UK.
No. The £135 limit determines how VAT is collected for eligible goods located outside the UK at the time of sale. Either the seller or the responsible platform can collect the tax.
No. The platform can account for VAT on certain B2C sales, but does not automatically account for imports, direct sales, all B2B transactions, goods movements, or the seller's VAT deduction.
It may eliminate registration for a specific service billed by a UK buyer. However, it does not automatically cover every service or sale of goods located in the UK.
It does not cover ordinary sales to England, Scotland and Wales. OSS may be relevant for qualifying sales of goods from Northern Ireland to EU consumers.
A registered taxpayer deducts eligible VAT on their UK VAT return. A business that is not, and should not be, registered may, under certain conditions, use the VAT65A scheme.
No. The EORI number is for customs operations, while the VAT number is for tax settlements. Both numbers may be required in a single model, but they serve different purposes.
This text is for informational purposes only and does not replace an individual tax assessment. For VAT in the UK, you should review your taxpayer status, place of taxation, transaction model, differences between England, Scotland and Wales and Northern Ireland, reverse charge, import VAT, OSS/IOSS, right of deduction, and current reporting obligations.
