Is there VAT on postage? Answered in Layman’s Terms

If you are in a delivery business, you might have a question, “is there VAT on postage?” To be honest, there is no straightforward answer with yes or no as the government of the UK, under the VAT Notice 700/24, explained it thoroughly, and in this article, we will simplify the complex terms.

The E-commerce business has seen a rise in sales in the past couple of years which proportionally boosted the revenue of the delivery business. However, before making a contract right out of the bat with any delivery partner or starting one of your own, you must understand the taxes related to postage to avoid stress when filing your tax returns and claiming VAT.

Should You Care About VAT on Postage?

If you fall into any of the two conditions, you must care about VAT on postage.

1. You send goods directly to your customer – like a D2C brand
2. You ship someone else goods – You provide the delivery solution to people who can not have their own delivery service

VAT on Stamps

Stamps provided by the post office are an exception regarding VAT on postage. It is because the Universal Postage Service offered by the post office is tax-free.

In layman’s terms, if you get stamps from the post office, you pay no VAT and can not claim a VAT return.

Is there VAT on Postal Redirection

If you are using postal redirection of Royal Mail Group Limited within the UK, then there is no VAT included. However, the same case does not apply to other postal service providers.

Royal Mail Group Limited has an article where you will find which services are liable and exempt from VAT.

The government’s notice for VAT on postage also mentions that other businesses providing postal redirection are not exempt from the VAT except for Royal Mail Group Limited.

HMRC VAT on Delivery Charges

If you charge your customer for delivery, the cost you obtain from the customer must include VAT or else when you file your taxes. You have to pay additional VAT from your pocket as the customer will definitely not be going to pay you later on.

In case you include the delivery price in the sales price, you will be liable to pay VAT on the total selling price of goods.

Is there VAT on Special Delivery Postage

Yes. Delivery partners often charge additional charges to the customer for fast delivery, which is seen as a special service. Since it is an additional service you are offering, the VAT is liable for that extra service.

Conclusion

Although we have tried to cover the full details for the question, it is likely to have doubts whether the postage service you provide is VAT liable or not. In that case, we recommend you contact us for any taxation-related help in the UK to ensure you can run your business without worrying about tax-related issues.