How To Know What VAT Rates to Use

VAT is a consumption tax that the government applies to all services and goods that are bought and sold for consumption or use. Of course, all places have their own VAT rules and regulations that the state must follow. With so much information out there, it can be confusing to understand what VAT rates are.

So, if you have any questions about VAT rates, you are in the right place. Here are all your VAT questions answered.

What Is the Current VAT Rate?

The VAT rate is subject to change, which is why you must understand the current VAT rate. It is 20% for now, and this rate is for most services and goods. However, if you are running a business, then you must know other VAT rates too.

For example, a reduced VAT rate is charged on children’s car seats, energy-saving measures, and sanitary products. This VAT rate comes to 5%. On the other hand, there is also a zero rate, which is 0%.

Such VAT rate is applicable to children’s clothing, newspapers, books, and most food. Of course, even though there is no VAT rate, businesses still have to record the sale and report it on their VAT return.

Finally, there are also some that are exempt from VAT rates. These include property and financial transactions, postage stamps, and more.

Who Has to Pay The VAT?

There is also a certain number of businesses that have to pay the VAT. According to the regulations, businesses that have a turnover of over £85,000 have to register and pay the VAT on the services or products that they buy or sell. If you don’t meet this requirement, you can still voluntarily register and pay for the VAT.

It works in the way that businesses charge their customers with VAT, and then they pay it ahead to HMRC. Businesses do this when they are filing their VAT returns.

How Do I Charge VAT?

VAT rates

You can charge VAT by adding it to the amount you charge your customers for the products or services you sell. You must do this properly to ensure you are filing an accurate VAT return. That is why your invoice must include:

  • Date
  • Invoice number
  • Name and address of the customer
  • Name and address of the business
  • Description of goods and services
  • VAT registration number

Besides that, each item on your invoice must have the quantity, unit price without VAT, VAT rate, total to pay without VAT, amount of VAT, and cash discounts. All of these will help you to file the VAT return without any issues.

Final Words

That is everything you need to know about what VAT rates you can use and how you can charge them. As a business, this is one of the most important things you can do as it will determine your VAT return filings and compliance. You must always double-check before you file such returns.

Even a small error can lead to significant problems with the authorities. So, be sure to do this right.

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