VAT & Tax
VAT for Hospitality Businesses: A Straightforward Guide
A plain-English overview of VAT calculations, inclusive pricing and common mistakes.
July 9, 20257 min readMaya Fielding · Hospitality finance writer
VAT is not complicated — it's just repetitive. The trap for hospitality operators isn't the maths; it's remembering that every price on the menu already includes it, and that HMRC wants their fifth back.
The rates
- Standard rate: 20% (most food & drink sold on-premises, alcohol, hot takeaway food) - Reduced rate: 5% (some energy, sanitary products) - Zero rate: cold takeaway food, most groceries, children's meals in specific cases
Adding VAT
Net × 1.20 = gross. £8.00 net becomes £9.60 gross.
Removing VAT
Gross ÷ 1.20 = net. A £15 dish contains £2.50 of VAT and £12.50 of net revenue. It's the £12.50 you use to calculate GP.
Threshold and registration
The UK VAT registration threshold is £90,000 of taxable turnover in a rolling 12 months. Once registered, you're in — reduction below the threshold doesn't automatically remove you.