How much is VAT and how to calculate your VAT refund in the UK?

What is VAT and much is it

Most products in the UK are subject to a Value Added Tax (VAT), which is a form of sales tax, or Goods and Services Tax (GST) as it is also known in some countries. This is normally charged at 20% and is included in the final sale price. When you see a price for something in a shop, any tax will already have been applied by the retailer, even if sometimes it is not stated on the purchase receipt.

VAT is paid by the ultimate consumer of the goods. However, because goods taken back home by international travellers are considered exports, visitors to the UK can avoid paying this tax when making purchases in UK shops.

Goods without VAT

The 20% tax rate applies to most goods, however, there are some easy to remember exceptions:

Basic food, such as most food items found in a typical supermarket, would have 0% VAT. Tourists often buy English tea as a souvenir to take back home. However as a basic food it is not eligible for tax-free shopping. On the other hand, most sweets, chocolates, and alcohol would include VAT, which can be claimed back.

Books and children’s clothes are not subject to tax either. Hence, just like with supermarket food or teas, there would be nothing to claim back.

How to calculate the VAT amount

The levy is charged by the UK government at 20% of the net price, which is the price before the tax is applied. This is equal to 16.67% of the gross price, which is the price actually paid by you in store.

Hence, if you made a £100 purchase, the VAT amount would actually be £16.67 (and not £20 as commonly mistaken).

How much is the VAT refund in the UK

Unfortunately you will never be able to receive 100% of the tax amount back. Retailers from where you purchased the goods or their affiliated refund companies usually charge a commission to process your claim.

This can vary depending on the company and can be as high as 40-50% once any additional payment charges, airport cash advances, or currency conversion fees are included. Hence, be sure to look into the provider’s small print to understand exactly how much refund you will receive.

Airvat charges a transparent flat fee of 20% of the VAT amount without any hidden charges or commissions. Our fee will always be much less than when getting an in-store tax refund form from the shop where you bought the goods. A typical Airvat customer on average receives 50% more refund relative to using the retailer's preferred service. You can find out exactly how much you will save by using our refund calculator tool within the Airvat app.

Note that tax-free shopping rules are changing in the UK from 1 January 2021 so you may also need to consider additional shipping costs and your home country import costs. Learn more details here.