After Brexit, the UK VAT system experienced significant updates, especially from 2021 onwards. Though the major reforms have settled, it’s still essential to understand how much VAT you must pay in 2025, what VAT rules apply, and how it affects your business or purchases.
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How Much is VAT?
Let’s see how much VAT you need to pay in the UK in 2025-26. Three different VAT rates are charged on various types of goods and services in the UK.
Standard Rate (20%)
Currently, the standard VAT rate of 20% is levied on most goods and services. This rate is also applicable to those goods that are below the standard distance selling EU VAT threshold sent from Northern Ireland to a non-VAT registered EU client.
Reduced Rate (5%)
A reduced rate VAT is 5%. Some of the goods and services are charged at a reduced rate, like:
- Home energy
- Children’s car seats
- Mobility aids for seniors
Zero Rate (0%)
As evident by the name, it means that it is charged at a 0% rate. It means that your customers will pay you 0% in VAT. However, still, you need to record and report it in your VAT returns. Some of the common examples of zero-rated goods are:
- Basic food items
- Books & newspapers
- Children’s clothing
- Most goods sent from Great Britain to countries outside the UK
- Most goods sent from Northern Ireland to countries outside the UK and EU
Along with these rates, there are some goods and services on which you don’t need to pay VAT means they are exempt from VAT. Postage stamps, financial and property transactions are common examples of it. However, you don’t need to include it in your taxable turnover.
You need to bear in mind that the VAT rates keep on changing, so you must be up to date with the VAT changes.
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VAT Reforms Post-Brexit (Still Applicable in 2025)
Though no major VAT reforms have been introduced recently, the post-Brexit VAT changes from 2021 remain in effect:
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The £15 VAT exemption for imported low-value goods is no longer valid.
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Sales under £135 to UK customers from overseas are now taxed at the point of sale, not at customs.
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Online marketplaces (like Amazon and eBay) are responsible for collecting VAT on behalf of overseas sellers for goods sold to UK customers under £135.
These changes aimed to simplify VAT collection on imports and reduce fraud, while also leveling the playing field for UK businesses.
Do You Need to Charge VAT on Exports to the EU?
If you’re selling goods to EU customers and you’re a VAT registered business, the good news is that you can sell your goods at a zero rate. From 2025 onwards, the goods you send to EU member states will be treated equally as the goods that come from a non-EU country. However, import taxes are payable on them. As goods, services of the UK supplier will be considered same as the supplier outside the EU.
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Summing Up
To sum up, you have understood the VAT changes and reforms that have recently been made. In addition, to find out the answer to ‘ how much is VAT payable in the UK’ you need to look at various factors like the business platform, size, nature and the location of your customers, etc. VAT can be a complex area for many, therefore it’s better to get in touch with a tax expert for help.
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Disclaimer: This blog post provides general information on VAT.
