VAT Guide: UK & EU (2026)

VAT Guide: UK & EU (2026)

Overview

This guide provides an overview of Value Added Tax (VAT) across the UK and EU, including rates, schemes, reporting requirements, and import considerations.

What is VAT?

UK VAT

VAT (Value Added Tax) is a consumption tax applied to most goods and services sold in the UK.

  • VAT is charged at the point of sale.
  • Businesses collect VAT from customers and remit it to HM Revenue & Customs (more commonly referred to as HMRC).
  • It is an indirect tax, collected by businesses on behalf of the government. 
  • VAT is charged at each stage of the supply chain.
EU VAT

VAT is a consumption tax applied to goods and services sold within EU Member States.

  • Businesses collect VAT from customers and remit it to the relevant local tax authority.
  • VAT is applied at each stage of production and distribution.
  • Rates and reporting rules vary by Member State.

VAT Rates (UK & EU)

UK VAT Rates (2025/26 – 2026)
The UK operates three main VAT rates:
  1. 20% – Standard rate
    Applies to most goods and services.
  1. 5% – Reduced rate
    Applies to specific items such as children’s car seats and domestic energy.
  1. 0% – Zero rate
    Applies to essentials such as most food, children’s clothing, and books.
  2. Some goods and services are VAT-exempt, including certain financial services, healthcare, and postal services.
EU VAT Rates (2026)
  1. Standard VAT rates across EU Member States typically range between 17% and 27%.
  2. Many countries operate reduced or super-reduced rates depending on local policy
  3. Rates vary by country and product category.

VAT Schemes (UK & EU)

UK VAT Schemes
Cash Accounting Scheme
  1. VAT is accounted for based on payments actually received and made.
  2. VAT is not due until your customer pays you.
  3. This scheme can assist with cash flow management.
EU VAT Schemes
To simplify cross-border trade, the EU operates several VAT simplification schemes.
OSS (One Stop Shop)
  1. Allows businesses to report eligible B2C cross-border EU sales via a single VAT return.
  2. Replaced the former MOSS scheme and covers distance sales of goods and certain services
  3. Filing is typically quarterly under Union and Non-Union schemes.
IOSS (Import One Stop Shop)
  1. Applies to goods imported into the EU from outside the EU valued at €150 or less.
  2. Allows VAT to be collected at checkout rather than at customs.
  3. Enables faster customs clearance and improved customer experience.

VAT Returns & Reporting

UK VAT Returns
Filing Frequency
  1. Standard filing is quarterly.
  2. VAT returns must be submitted every 3 months (quarterly) unless on an annual or monthly scheme. 
Deadlines
VAT return and payment deadline:
  1. 1 month + 7 days after the end of the VAT period.
Thresholds & Requirements
  1. VAT registration is required if taxable turnover exceeds £90,000 (2026 threshold).
  2. VAT Return must include:
    - Output VAT (VAT charged to customers)
    - Input VAT (VAT paid on purchases)
    - Total sales and purchases
    - VAT payable or reclaimable
EU VAT Returns
VAT reporting requirements vary by Member State but generally include:
  1. Taxable and exempt transactions
  2. Output VAT charged
  3. Input VAT paid
  4. Intra-EU acquisitions and dispatches
  5. Reverse charge transactions
Filing Frequency
  1. Typically monthly or quarterly, depending on the country and turnover level.

Imports & Customs (UK & EU)

UK Imports & Customs
  1. Import VAT is due on goods entering the UK.
  2. Businesses may use Postponed VAT Accounting (PVA) to declare and recover import VAT on the same VAT return.
  3. VAT treatment depends on commodity codes and customs classification.
EU Imports & Customs
The EU operates as a customs union:
  1. VAT and duties are generally charged in the country of entry.
  2. Special schemes (such as IOSS) may simplify the process for low-value goods.
  3. Standard customs and VAT rules apply unless a simplification scheme is used.

To Summarise: 

VAT rules vary depending on:
  1. Product type
  2. Sales channel (B2C vs B2B)
  3. Storage location
  4. Cross-border movement of goods

Need more help? 

If you need advice, or have any questions, please reach out and we'll be happy to help!

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