Temporary reduction in VAT for hospitality and tourism services affected by the coronavirus crisis
From 1st October 2021, the government is introducing a new reduced rate of 12.5% VAT for hospitality, holiday accommodation and attractions. This new rate will remain in place until 31st March 2022. You can find more information about the new reduced rate on the government’s website.
What is VAT?
VAT is short for 'Value Added Tax'. It's a tax on the sale of most goods and services. Find out more about VAT on our accounting glossary.
The VAT registration limit:
Businesses & Individuals must register for VAT once they have exceeded, or expect to pass their respective thresholds which are based on their VAT Taxable Turnover.
The current VAT registration limit is: £85,000
For more information on the VAT rate that applies to you check out our guide to the different rates of VAT.
Example: How John works out how much VAT he has to pay
John is a self-employed graphic designer. His business is registered for VAT and the services he sells are subject to VAT at the standard rate (20%).
John invoices his customer for services at an agreed price of £2,000 + VAT:
£2,000 + (£2,000 x 20%) = £2,400 total
He will keep £2,000 of this for his business, but the £400 VAT belongs to HMRC and he will include this on his next VAT return to be paid to HMRC.
How to pay your VAT bill
| Online or telephone banking (Faster Payments) | Same or next day |
| CHAPS | Same or next day |
| Bacs | Three working days |
| Debit card | Three working days |
| Credit card (1.5% charge) | Three working days |
| Direct Debit | Three working days |
| Standing order | Three working days |
| At your bank or building society | Three working days |
Note: For most types of payment you’ll need your 9-digit VAT registration number, which can be found on your online account or your VAT registration certificate.
Online or telephone banking: If you’re paying by online or telephone banking (Faster Payments, CHAPS or Bacs) details for the HMRC bank account you should pay your VAT bill into can be found here.
Debit or credit card: If you are paying by debit or credit card you can do so by following the links from your HMRC online account.
Direct Debit: You can set up a Direct Debit from your HMRC online account. Make sure you do this at least three working days before you submit your VAT return to ensure the payment is taken from your account in time. Once the Direct Debit is set up, HMRC will collect payments from your account three working days after the deadline on your VAT return.
Standing order: If your business uses the VAT Annual Accounting Scheme you can pay your VAT bill by standing order. You can set this up when you first apply for the Annual Accounting Scheme or later by using form VAT 622 or via online or telephone banking.
At your bank or building society: To pay at your bank or building society you’ll need to order paying-in slips from HMRC which can take up to six weeks to arrive. Using the paying-in slips you can pay by cash or a cheque made payable to ‘HM Revenue and Customs only’ followed by your 9-digit VAT registration number.
Previous VAT rates
| 4th Jan 2011 to today | |
|---|---|
| Standard rate | 20% |
| Reduced rate | 5% |
| Zero rate | 0% | 1st Jan 2010 to 3rd Jan 2011 |
| Standard rate | 17.5% | 1st Dec 2008 to 31st Dec 2009 |
| Standard rate | 15% | 19th Mar 1991 to 30th Nov 2008 |
| Standard rate | 17.5% | 18th Jun 1979 to 18th Mar 1991 |
| Standard rate | 15% |
Previous VAT thresholds
| From 1st Apr 2017 to today | £85,000 |
| From 1st Apr 2016 to 31st Mar 2017 | £83,000 |
| From 1st Apr 2015 to 31st Mar 2016 | £82,000 |
| From 1st Apr 2014 to 31st Mar 2015 | £81,000 |
| From 1st Apr 2013 to 31st Mar 2014 | £79,000 |
| From 1st Apr 2012 to 31st Mar 2013 | £77,000 |
| From 1st Apr 2010 to 31st Mar 2011 | £70,000 |
| From 1st May 2009 to 31st Mar 2010 | £68,000 |
| From 1st Apr 2008 to 30th Mar 2009 | £67,000 |
| From 1st Apr 2007 to 31st Mar 2008 | £64,000 |
| From 1st Apr 2006 to 31st Mar 2007 | £61,000 |
| From 1st Apr 2005 to 31st Mar 2006 | £60,000 |
| From 1st Apr 2004 to 31st Mar 2005 | £58,000 |
| From 10th Apr 2003 to 31st Mar 2004 | £56,000 |
| From 25th Apr 2002 to 9th Apr 2003 | £55,000 |
| From 1st Apr 2001 to 24th Apr 2002 | £54,000 |
| From 1st Apr 2000 to 31st Mar 2001 | £52,000 |
| From 1st Apr 1999 to 31st Mar 2000 | £51,000 |
| From 1st Apr 1998 to 31st Mar 1999 | £50,000 |
| From 1st Dec 1997 to 31st Mar 1998 | £49,000 |
| From 27th Nov 1996 to 30th Nov 1997 | £48,000 |
| From 29th Nov 1995 to 26th Nov 1996 | £47,000 |
| From 30th Nov 1994 to 28th Nov 1995 | £46,000 |
| From 1st Dec 1993 to 29th Nov 1994 | £45,000 |
| From 17th Mar 1993 to 30th Nov 1993 | £37,600 |
| From 11th Mar 1992 to 16th Mar 1993 | £36,600 |
| From 20th Mar 1991 to 10th Mar 1992 | £35,000 |
| From 21st Mar 1990 to 19th Mar 1991 | £25,400 |
Disclaimer: The content included on this page is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included on this page. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.
