Guide · VAT · United Kingdom

VAT on UK invoices, plainly.

Whether you should register, what counts as a valid VAT invoice, how to handle the three main rates, what Making Tax Digital actually changes, and how to keep records HMRC won't argue with. Written for sole traders, Ltd companies, and any small business that wants the truth in plain English.

The short version. If your taxable turnover is below £90,000 over any rolling 12 months you don't have to register for VAT. Above that, registration is mandatory. UK VAT has three main rates: 20% standard, 5% reduced (energy, child seats, some refurbishment), 0% zero-rated (food, books, children's clothing). Exports of services to overseas business customers are usually "outside the scope" of UK VAT. A valid VAT invoice needs your VAT number, the rate, the VAT amount, and the gross total.

i.The £90,000 threshold

You must register for VAT if your taxable turnover exceeds £90,000 over any rolling 12-month period (raised from £85,000 in April 2024). Watch this carefully if you're growing - if your turnover hits the threshold halfway through a tax year, you have 30 days to register, then start charging VAT from the first day of the following month.

You can also register voluntarily below the threshold. Reasons to do so:

You sell to VAT-registered businesses who can reclaim the VAT - so adding 20% doesn't actually cost them anything, and you get to reclaim VAT on your own purchases.
You appear more established (registered status is publicly searchable).
You expect to grow above the threshold soon anyway and want consistent invoicing from day one.

Reasons not to register voluntarily:

Your customers are members of the public or unregistered small businesses - adding 20% becomes a real cost to them.
Your input VAT (VAT on your purchases) is small, so the reclaim doesn't outweigh the compliance overhead.

ii.The three main VAT rates

Standard rate - 20%

The default. Applies to most goods and services. If you don't have a specific reason to apply a different rate, this is the one.

Reduced rate - 5%

Applies to specific categories: domestic fuel and power, child car seats, some building services on residential conversions, some women's sanitary products (note: this changed; some items are now zero-rated). Check the latest HMRC list before applying.

Zero rate - 0%

Applies to most food (excluding restaurants and hot takeaway), most books and newspapers (excluding e-books, which are now zero-rated), children's clothing and shoes, and exports of goods. You still issue an invoice and the supply is "VATable" - just at 0%.

Outside the scope / exempt

Some supplies are entirely outside the VAT system - financial services, certain insurance, education, and most exports of services to overseas business customers. The invoice doesn't carry VAT and you can't reclaim input VAT relating to these supplies.

iii.What a valid UK VAT invoice must contain

HMRC sets specific requirements for a full VAT invoice. VioBusiness includes all of these when you set a VAT rate:

The words "VAT invoice" or "Tax invoice" (in practice, "Invoice" is accepted if all the other elements are present)
A unique sequential invoice number (no gaps, no repeats)
The date of issue, and the tax point if different
Your business name, address, and VAT registration number
The customer's name and address
A description of the goods or services supplied, with quantity
The unit price (excluding VAT)
The rate of VAT applied per line (or per invoice)
The rate of any discount
The total amount excluding VAT
The VAT amount
The total amount including VAT

For invoices under £250 including VAT, a simplified VAT invoice is allowed with fewer fields (drop the customer details, the unit price, and a single tax-inclusive total). Useful for retail point-of-sale. Full invoices are still simpler to produce consistently.

iv.Making Tax Digital (MTD) for VAT

MTD for VAT applies to all VAT-registered businesses since April 2022. The requirements:

You must keep digital records of your VAT-relevant transactions.
You must submit your VAT return using compatible software with a digital link from your records to the submission.
The "digital link" rule means you can't just retype numbers - data must flow electronically from records to return.

VioBusiness produces digital records (invoices and expenses stored electronically with all required fields). To submit a VAT return, you'd export the CSV from VioBusiness and import it into MTD-compatible bridging software like 123 Sheets, Vital Tax, QuickFile, or others. The CSV-to-return path is HMRC's accepted "digital link".

v.Reverse charge and overseas customers

Two situations worth understanding for any UK business that sells abroad or buys from abroad:

Reverse charge on construction services (CIS-adjacent)

Since 2021, VAT-registered construction service suppliers must use reverse charge when supplying VAT-registered construction businesses. The supplier doesn't charge VAT; the customer accounts for both output and input VAT on their return. The invoice should clearly state "Reverse charge: customer to pay the VAT to HMRC". See our CIS deductions guide for the related CIS deduction mechanics.

Selling services to overseas business customers

If you sell services to a business customer outside the UK (B2B), the supply is typically "outside the scope" of UK VAT - the customer accounts for VAT in their own country under their local reverse charge rules. The invoice doesn't carry VAT but should include a note like "VAT reverse charged - Article 196 EU VAT Directive" or similar.

Selling to overseas consumers

If you sell services to a non-business customer outside the UK (B2C), rules vary by what you sell and where. For digital services to EU consumers, the EU's One Stop Shop (OSS) rules apply. For most professional services to non-EU consumers, you don't charge UK VAT.

vi.Common VAT mistakes

Forgetting the registration threshold is a rolling 12 months, not the tax year. If you hit £90,000 in any 12-month period you must register.
Mixing personal and business expenses when claiming input VAT. Keep a clean separation; VioBusiness's expense tracker is built for this.
Charging VAT on outside-the-scope supplies like services to overseas businesses. The invoice should state the reverse charge note instead.
Not putting your VAT number on the invoice. HMRC and your customers expect it; many will refuse to pay without it.
Skipping invoice numbers or starting again from 1 each year. Numbers must be unique and sequential across the lifetime of the business.

vii.How VioBusiness handles UK VAT

Set your VAT registration number once in the Business Profile. Set the default VAT rate (typically 20%). On each invoice you can override the rate per invoice - useful for reduced-rate items, exports, or pre-registration invoices at 0%. The VAT line itemises on every invoice with the rate, the VAT amount, and the gross total. Records are kept locally with everything HMRC could ask for at audit, and CSV-exportable for MTD bridging software or your accountant.

For more detail on the app see our UK page.

Disclaimer: This guide is general information, not VAT advice. Rules change frequently and exceptions abound. For specific situations - reduced rates on specific products, partial exemption calculations, complex reverse charge cases - consult a UK accountant or HMRC directly.

viii.Get VioBusiness

UK-made invoice app for sole traders and small business. £15.99 lifetime. No subscription. More on the UK page.

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