What is VAT?
VAT (Value Added Tax) is a tax added to most goods and services sold by VAT-registered businesses in the UK. The standard rate is 20%. A business must register once its taxable turnover passes £90,000 in 12 months, then charges VAT on its sales, reclaims VAT on its purchases, and pays the difference to HMRC each VAT period.
What to know
- Three rates: standard 20% on most goods and services, reduced 5% on some such as children's car seats and home energy, and zero 0% on items such as most food and children's clothes. Some things are exempt, such as postage stamps and financial transactions.
- VAT charged on sales is output VAT; VAT paid on purchases is input VAT. The VAT Return reports both and the business pays or reclaims the difference.
- Registration is compulsory at £90,000 of taxable turnover in the last 12 months, or when it is expected within the next 30 days. A business can register voluntarily below that.
- A VAT-registered business must keep records of the VAT it pays and charges, and submit returns using Making Tax Digital software.
Sources: GOV.UK, "How VAT works"; GOV.UK, "VAT rates"; GOV.UK, "Register for VAT". Checked 1 October 2026.
VAT and RewardsPilot
Points are earned on the net amount excluding VAT, at 4 RewardsPilot points per £1 of net spend. RewardsPilot's own invoice carries VAT on its service; for a VAT-registered business using it for taxable activities that VAT is intended to be recoverable, subject to the business's own position.
Related
All terms
PAYE · National Insurance · UTR number · Corporation Tax · Business rates · VAT registration number · VAT return · VAT invoice · Avios
Official facts are quoted from GOV.UK and can change. This is general information, not tax or legal advice. Programme facts come from the published RewardsPilot rate and the Rewards Programme Rules.