Ecommerce

What is the VAT Rate in the UK for Businesses in 2022?

If you want to know what is vat rate in uk, first you have to know that VAT is the abbreviation of Value-added tax, the money you have to pay when you buy goods or services. Previously, in July 2020, the UK government presented a temporarily decreased rate for the hospitality industriousness to show assistance to business people suffering from the COVID-19 pandemic. Therefore, the VAT was reduced from 20 percent to just 5 percent until October 1, 2021. Then the UK government again increased it to 12.5 percent. 

But If you want to know what the VAT rate in the UK will be in 2022, continue reading.

What is the current vat rate in the UK?

Before predicting the VAT rate of 2022, let’s go through the current uk vat rate. The normal UK vat rate is about 20%, but Rishi Sunak decreased it in July last year during the Covid crisis in his mini-budget.

For instance, this VAT rate reduced about 5 percent for businesses in hospitality and tourism. They do so in the hope of helping the industry rebound after the worst effects of the Covid pandemic on these businesses. Based on the submitted vat returns, they first decided to cut the taxes until January 12, 2021. But then Mr. Sunak announced that they will keep the lowered rate until September 30. After that, they will increase it to 12.5% until April 2022, and the standard 20% rate will repeat again.

How much is vat in theUK?

The UK government provides three types of VAT rates: standard, reduced rate, and zero rates. Here, you can read a simple guide about each of these terms for your business:

Standard rate 

The highest vat UK rate is the standard one, which contains the most goods and services. While most food and drinks are zero-rated for VAT, some exceptions include alcoholic drinks, confectionery, sports drinks, and hot takeaways.

Reduced rate 

This reduced rate includes certain goods and services like products to help people stop smoking or children’s car safety seats.

Zero rate 

There is a zero rate for a range of different goods and services, such as travel fares, baby/children’s clothes, books, and most food.
uk vat rate

Pay attention that some goods and services are excused from VAT. For example, you should not pay tax for financial and property transactions and postage stamps. While some people imagine that zero-rated goods and VAT-exempt goods are the same, they are not. In summary, items with zero-rate VAT are the ones on which the government could charge VAT but set the current rate to zero. Exempt products are items that VAT will not charge or be paid on.

How has the UK vat rate changed over time?

At first, VAT was presented in 1973 and replaced the purchase tax. It has changed considerably since the first time it was introduced. Totally, the UK VAT rate might change because of different reasons, such as the need to boost tax gains or raise public spending. Originally, they charged the UK VAT rate at 10%, then it gradually increased to 17.5% from 1991 to 2008. After it decreased to 15% in 2008-2009, it increased again to 17.5%, before rising to the present UK VAT rate of 20% in 2011.

What is the vat threshold?

You have to register for the Value-Added Tax (VAT) when your turnover exceeds or might exceed the VAT thresholds. Based on your turnover in any continuous 12 month period, you have to pay vat thresholds. Your turnover during a year affects the threshold for intra-Community distance sales of goods and cross-border telecommunications, broadcasting, and electronic (TBE) services. When your turnover is less than a threshold boundary, you have to register for VAT.  

Here is the principle of thresholds:

  • If you are the person who supplies services only, you have to pay €37,500.
  • Taxable people who make mail orders, intra-Community distance sales of goods, or cross-border TBE services into the State, have to pay €10,000.

The threshold calculation depends on the suppliers, the total worth of intra-Community distance of goods deals, and cross-border TBE services for whole European Union (EU) Member States customers. 

Only people can apply for thresholds who establish their permanent address or reside in just one Member State. Otherwise, the supplier can register for Irish VAT for those products. 

How do you pay UK vat?

You can try many ways to pay VAT to HMRC like online with a vat account, using telephone banking, or paying in person at your bank. While paying VAT in real life is quite rare, we will cover these payment ways in this section.

In-person

In this way, you have to order payment in slips from HMRC at least six weeks before your payment. Choose to do this electronically or by phone. Now it is time to pay it from a bank in a cheque or cash. 

Standing order

People on the Annual Accounting Scheme or Operating Payments on Account prefer to use this method, but be careful that it takes three working days. To set it up or use electronic or telephone banking, use the form of VAT622.

Direct Debit

You can pay the VAT return via Direct Debit using a digital VAT account. You have to do this three days before your first payment date. Then, they will automatically take it from your account.

 

Pay your VAT return bill over the phone

You can call 0300 200 3700 phone number and ask your questions about your VAT. But if you are calling from abroad, the number is +44 2920 501 261. Pay attention you cannot pay your bill during your conversation with an HMRC counselor. For payment, you need your postal code and VAT registration number and need to call between 8 am to 6 pm on weekdays.

 Online payment methods:

  • Corporate debit card: Non-refundable cost, from 1st November 2020
  • Corporate credit card: Non-refundable cost charged
  • Personal debit card: No cost
  • Personal credit card: Not permitted

Online banking:

  • Faster payments: You have to pay it the exact day or a few days later.
  • CHAPS: The Clearing House Automated Payment System (CHAPS) bank-to-bank technology that you can make payments the exact day, as long as you send your fee by your bank’s deadline
  • Bacs: Bankers Automated Clearing Services (Bacs) is a between bank payment accounts that take three working days to be done.

Conclusion:

If you own a business in the UK and work there, you have to know about the VAT rate of the UK businesses. Here, we will answer some of your questions like; what is the current vat rate, and how much is vat in the uk. Also, you can read about the payment VAT methods.

 

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