VAT rates in the United Kingdom
The United Kingdom imposes Value Added Tax (VAT) at different rates as follows for various goods and services.
1. Standard rate - 20%
The standard VAT rate is applicable to all taxable goods and services in the United Kingdom, except when a specific measure allows for a reduced rate.
2. Reduced rate - 5%
Some goods and services, for example, children’s car seats and home energy.
3. Zero rate - 0%
Printed books (including e-books); newspapers and periodicals; supplies of food and drink (some exceptions); take away food (if bought on the catering premises); domestic passenger transport; some construction work on new buildings; some supplies of new buildings; intra-community and international passenger transport.
Source: VAT rates - GOV.UK
VAT rates on different goods and services - GOV.UK
Daily allowances in the United Kingdom
Employees of UK companies travelling for business may be entitled to per diem allowances as set out below.
Domestic Daily Allowance
The scale rate payment allowances are set by HMRC.
| Condition | Amount |
| 5 hours or more | £5 |
| 10 hours or more | £10 |
| 15 hours or more and where travel is ongoing after 8 pm | £25 |
| Five or ten hours or more, and travel is ongoing at 8 pm | additional £10 |
Conditions
To qualify for these rates, travel must meet the following criteria:
- The travel must be in the performance of an employee’s duties or to a temporary workplace.
- The employee should be absent from their normal workplace or home for a continuous period of over 5 or 10 hours.
- The employee should have incurred a meal cost (food and drink) after starting the journey.
There are no benchmark rates for overnight accommodation costs.
| Condition | Amount (up to) |
| Breakfast rate | £5 |
| One meal (5 hour) rate | £5 |
| Two meal (10 hour) rate | £10 |
| Late evening meal rate | £15 |
Source: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim05231
Foreign daily allowance
Foreign per diem rates include:
- a 24-hour rate, including breakfast, lunch, dinner, other, drinks, and hotel to office rates
- overnight accommodation rate
If the employee is travelling to a place not shown in the table of overseas scale rates, the employer may pay or reimburse the employees using the rates for the closest city shown for the country they have travelled to.
If the country is not shown, the rates for the geographically closest city can be used.
| Subsistence Type (e.g.: Germany) | Rate in € |
| Over 5 hours | €22 |
| Over 10 hours | €65,50 |
| 24 hour rate | €72 + room rate |
| Room rate | €167,50 |
| Breakfast | €0 (included in room rate) |
| Lunch | €18,50 |
| Dinner | €40,50 |
| Other | €0 |
| Drinks | €6,50 |
| Hotel to office | €6,50 |
| Total residual | €72 |
Source: https://www.gov.uk/guidance/expenses-rates-for-employees-travelling-outside-the-uk
Mileage allowances in the United Kingdom
HMRC Advisory Fuel Rates are published each year on December 1st, March 1st, June 1st and September 1st of each year.
From 1 June 2025, the advisory electricity rate for fully electric cars is 7 pence per mile. Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.
| Engine size | Petrol - rate per mile | LPG — rate per mile |
| 1400cc or less | 12 pence | 11 pence |
| 1401cc to 2000cc | 14 pence | 13 pence |
| Over 2000cc | 22 pence | 21 pence |
| Engine size | Diesel — rate per mile |
| 1600cc or less | 11 pence |
| 1601cc to 2000cc | 13 pence |
| Over 2000cc | 17 pence |
If the mileage rate you pay is no higher than the advisory fuel rates for the engine size and fuel type of the company car, there will be no taxable profit and no Class 1A National Insurance to pay.
If your cars are more fuel efficient, or if the cost of business travel is higher than the guideline rates, you can use your own rates to reflect your situation.
If you pay rates that are higher than the advisory rates but cannot show that the fuel cost per mile is higher, there will be no fuel benefit charge if the mileage payments are only for business travel. Instead, you’ll have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes.
Mileage Allowance Payments
Mileage Allowance Payments (MAPs) are paid to employees for using their own vehicle for the purpose of business journeys.
| First 10.000 business miles | Each business mile over 10.000 | |
| Cars and vans | 45 pence | 25 pence |
| Motorcycles | 24 pence | 24 pence |
| Bicycles | 20 pence | 20 pence |
The current tax year is from 6 April 2025 to 5 April 2026.
An additional 5p per passenger per business mile can be paid for the carrying of fellow employees in a car or van on journeys which are also work journeys for them.
Source: https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax https://www.gov.uk/guidance/advisory-fuel-rates
Electronic archiving and retention period in the United Kingdom
A taxable person, see CH10400, is only legally required to retain records that are less than 6 years old.
HMRC may set out in writing conditions and exceptions to the general rules below for preserving information, see CH13200.
If a person preserves the information contained in paper records on computer by transferring the information into an electronic form, they may discard the paper provided that the method of storage used is capable of
- capturing all the information needed to make a correct and complete return, and
- reproducing that information in a legible form.
If the method cannot do these things, the person must also retain the original documentation.
Source: https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch13100
https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch15200
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