VAT on food in the UK is the application of Value Added Tax (VAT) to food and drink supplies under rules set by HM Revenue and Customs (HMRC). VAT on food for restaurants, cafés, takeaways, and catering businesses depends on whether the supply is zero-rated or standard-rated.
Most basic cold food items, including bread, milk, fruit, and vegetables, are zero-rated at 0% VAT. Hot food, hot takeaway meals, confectionery, crisps, soft drinks, and food consumed on the premises qualify as standard-rated supplies at 20% VAT. UK VAT on food with eat-in service is treated as catering and attracts the standard rate.
Food VAT compliance requires accurate classification, correct invoicing, and proper reporting once taxable turnover exceeds £90,000, the UK VAT registration threshold.
| Quick Answer: Basic groceries and most unprocessed food = 0% VAT. Hot takeaway food, alcohol, crisps, confectionery, and fizzy drinks = 20% VAT. Some exceptions apply at 5%, particularly for certain supplies made before VAT rate changes. |
What is VAT on Food in the UK?
VAT (Value Added Tax) is a consumption tax applied to goods and services in the UK. Most products are charged at the standard rate of 20%. However, food and drink items are treated differently. HMRC divides food into three VAT categories: zero-rated (0%), reduced rate (5%), and standard rate (20%).
The reason food has a special VAT treatment is rooted in the idea that people should not be taxed heavily on everyday essentials. So, your weekly shop at the supermarket, bread, milk, vegetables, meat is mostly zero-rated. But a meal at a restaurant, a hot pasty from a bakery counter, or a can of fizzy drink does not get the same treatment.
For business owners, the VAT treatment of your food sales directly affects how much VAT you collect and pay to HMRC. Getting this wrong can lead to underpayments, penalties, or surprise VAT bills, none of which you want.
Is There VAT on Food Items in the UK?
Yes, but not always. This is where many business owners get confused. VAT on food in the UK depends entirely on what the food is, how it is sold, and where it is consumed.
Here is a simple way to think about it:
- Food sold as a basic grocery item = generally zero-rated (0% VAT)
- Hot food sold for immediate consumption = standard rate (20% VAT)
- Food eaten in at a restaurant or cafe = standard rate (20% VAT)
- Cold food bought from a supermarket to take home = usually zero-rated (0% VAT)
HMRC has very specific rules about what counts as ‘food’ for VAT purposes. The general principle is that food supplied for human consumption is zero-rated unless it falls into an excepted category.
What Food Items Are Zero-Rated for VAT?
Zero-rated means the VAT rate is 0%. You still need to record these sales on your VAT return, but you do not charge VAT to your customer. Zero-rated food items include:
- Bread, rolls, and baps
- Cereals and oats
- Raw meat and fish
- Vegetables (fresh, frozen, dried)
- Fruit
- Dairy products such as milk, cheese, and butter
- Eggs
- Tea, coffee (unbrewed, the beans or leaves themselves)
- Sugar and salt
- Cold sandwiches and salads sold as packaged food
- Pasta, rice, and flour
What Food Items Do Not Have VAT? And Why?
A common question from business owners is: what food items do not have VAT? The answer lies in HMRC’s zero-rating provisions under Schedule 8 of the Value Added Tax Act 1994. The purpose is to protect essential food from tax.
Food does not attract VAT (i.e., it is zero-rated) when all of the following apply:
- It is intended for human consumption
- It is not a confectionery item (e.g., chocolates, sweets, ice cream)
- It is not a snack food (e.g., crisps, popcorn, roasted nuts sold as snacks)
- It is not a hot food item prepared or kept hot for sale
- It is not consumed on the premises where it is sold
If any of those conditions are not met, HMRC typically applies the standard 20% rate.
Is VAT on Food 20%?
Not always, but it can be. The 20% standard rate applies to certain food and drink products. Whether your food sale is 20% VAT depends on what you sell and how you sell it.
When is Food Charged at 20% VAT?
The standard 20% VAT rate applies to the following food-related items:
| Food / Drink Item | VAT Rate | Reason |
| Hot food (pasties, pies, chips, hot sandwiches) | 20% | Prepared/kept hot for immediate consumption |
| Restaurant meals (eaten in) | 20% | Consumed on premises |
| Alcoholic drinks (beer, wine, spirits) | 20% | Standard-rated product category |
| Crisps and savoury snacks | 20% | Classified as snack food |
| Confectionery (sweets, chocolates) | 20% | Excepted from zero-rating |
| Ice cream | 20% | Excepted from zero-rating |
| Carbonated / fizzy drinks (e.g., Coke) | 20% | Standard-rated beverages |
| Sports and energy drinks | 20% | Standard-rated beverages |
| Potato crisps and similar snacks | 20% | Snack food exception |
This is one of the most common areas where food business owners make mistakes on their VAT returns. For example, if you run a bakery and sell both cold and hot sausage rolls, the cold ones are zero-rated and the hot ones are 20%. You need to track them separately.
What Food is 5% VAT?
The 5% reduced VAT rate for food is quite rare in day-to-day food retail. Most food is either 0% or 20%. However, the 5% reduced rate can apply in specific circumstances:
- Children’s car seats were the most common 5% product in this category, but for food specifically, HMRC has applied the reduced rate to certain supplies in hospitality sectors during temporary government schemes (such as the Eat Out to Help Out period and related VAT relief in 2020-2021).
- Certain food supplies made as part of catering services during HMRC-designated relief periods may have been subject to 5%.
As of the current standard rules, there are no widely applicable 5% VAT categories for everyday food items sold by cafes, restaurants, or supermarkets. The 5% rate has historically been temporary or applied to specific utility-related food supplies.
| Important: Always check the current HMRC VAT guidance at gov.uk for any active reduced rate schemes. Rates can change based on government policy, particularly for the hospitality sector. |
Do You Have to Pay VAT on Drinks?
Yes, but it depends on the type of drink. Not all drinks carry the same VAT rate. Here is a breakdown:
| Drink Type | VAT Rate |
| Tap water (supplied as part of a public utility) | 0% |
| Bottled water (still or sparkling) | 0% |
| Milk (including flavoured milk in some cases) | 0% |
| Tea (loose leaf or tea bags, not prepared) | 0% |
| Coffee (ground or beans, not prepared) | 0% |
| Prepared hot drinks (e.g., latte, cappuccino in a cafe) | 20% |
| Fruit juice (pure, not sweetened) | 0% |
| Fizzy soft drinks (e.g., Coke, Fanta, Pepsi) | 20% |
| Sports and energy drinks | 20% |
| Beer, wine, and spirits | 20% |
| Alcoholic cider and flavoured drinks | 20% |
Is There VAT on a Can of Coke?
Yes. A can of Coca-Cola (or any carbonated soft drink) is charged at the standard 20% VAT rate. Fizzy drinks are not considered essential food items under HMRC rules and therefore do not qualify for zero-rating.
This applies whether the customer buys it from a supermarket shelf, a vending machine, or your restaurant fridge. The product itself is standard-rated, so 20% VAT always applies.
Is Coffee 20% VAT?
This depends on how the coffee is sold. This is one of the most asked questions by cafe and coffee shop owners, and the answer has a meaningful impact on your VAT return.
Coffee Beans and Ground Coffee, 0% VAT
If you sell coffee beans, ground coffee, or coffee pods as a product for customers to take home and brew themselves, this is zero-rated at 0% VAT. These are treated as food ingredients, not a prepared beverage.
Hot Prepared Coffee in a Cafe, 20% VAT
If you prepare and serve coffee to a customer in your cafe, whether it’s an espresso, latte, cappuccino, or Americano, this is a hot drink prepared for immediate consumption. HMRC classes this as standard-rated, so 20% VAT applies.
What About Takeaway Coffee?
Hot takeaway coffee is also subject to 20% VAT. The key trigger is that it is hot and prepared for immediate consumption. It does not matter if the customer takes it off-site. If you hand them a hot cup of coffee, it is 20% VAT.
| Cafe Owner Tip: If your annual turnover is above the VAT registration threshold (currently £90,000 as of April 2024), you must register for VAT. Once registered, you must charge 20% VAT on hot drinks and keep clear records of your zero-rated vs standard-rated sales. |
Is VAT on Alcohol 20%?
Yes. All alcoholic drinks are charged at the standard 20% VAT rate in the UK. There are no exceptions or reduced rates for alcohol. This applies to:
- Beer (draught and bottled)
- Wine (red, white, rose, sparkling)
- Spirits (whisky, gin, vodka, rum, etc.)
- Cider and perry
- Alcopops and flavoured alcoholic beverages
- Low-alcohol drinks (if they still contain any alcohol above the HMRC threshold)
In addition to VAT on alcoholic drinks are also subject to Alcohol Duty (excise duty), which is a separate tax charged based on the strength and volume of the drink. So if you run a pub or restaurant that sells alcohol, you are dealing with both VAT and Alcohol Duty obligations.
What About Non-Alcoholic Drinks in a Bar or Restaurant?
If you serve soft drinks, mixers, or juices alongside alcohol in a restaurant or bar setting, the same VAT rules apply as above. Fizzy drinks and sugary soft drinks are 20%, while plain water and pure fruit juice are 0%.
VAT Rates for Cafes, Restaurants, and Takeaways
If you own or operate a cafe, restaurant, or takeaway, VAT on food and drink is something you will deal with every single day. Here is a clear, practical guide to help you manage it correctly.
VAT in a Cafe
Cafes typically sell a mix of zero-rated and standard-rated items. You need to clearly separate these in your till system and accounting records.
| Cafe Sale | VAT Rate |
| Cold sandwich or wrap (sealed or packaged) | 0% |
| Hot toasted sandwich or panini | 20% |
| Cold cake slice | 20% (confectionery exception) |
| Hot breakfast (cooked on premises) | 20% |
| Still water (bottled) | 0% |
| Hot coffee or tea (prepared) | 20% |
| Bagged ground coffee or tea bags to take home | 0% |
| Fizzy drinks / cans | 20% |
VAT in a Restaurant
For restaurants, all food and drink consumed on the premises is standard-rated at 20%. This is because HMRC treats on-premises consumption as a ‘catering service’, not a simple food supply.
If your restaurant also sells packaged goods, condiments, or retail items for customers to take home, those may be zero-rated depending on the product.
VAT in a Takeaway
Takeaways are a common area of confusion. Here is the key rule: if the food is hot, it is 20% VAT. If the food is cold, it may be zero-rated.
| Takeaway Sale | VAT Rate |
| Hot chips or fries | 20% |
| Hot pizza | 20% |
| Hot curry or noodles | 20% |
| Cold sushi (pre-packaged) | 0% |
| Cold sandwich to take away | 0% |
| Hot drink (coffee, tea) | 20% |
| Cold drink (juice, bottled water) | 0% |
| Fizzy drink (canned or bottled) | 20% |
| Did you know? If you sell a cold chicken from a rotisserie that has been kept hot as part of your display, HMRC may still treat it as hot food and apply 20% VAT. The test is whether the food was kept hot with the intention of being consumed hot. |
Common VAT Mistakes Food Business Owners Make
Based on common HMRC compliance issues, here are the mistakes food businesses make most often with VAT:
1. Not Separating Zero-Rated and Standard-Rated Sales
If your till system does not clearly differentiate between 0% and 20% sales, you will either over-report or under-report VAT. Always configure your point-of-sale system to apply the correct VAT rate to each product.
2. Treating All Takeaway Food as Zero-Rated
A common error is assuming that because food ‘goes out the door’, it must be zero-rated. Not true. Hot food taken away is still 20% VAT. The temperature and intended consumption of the food determines the rate, not the direction the customer walks.
3. Forgetting to Account for Mixed Supplies
If you sell a meal deal with a sandwich and a fizzy drink, the sandwich may be zero-rated and the drink may be 20%. You need to split the value correctly and apply VAT accordingly to each element.
4. Not Registering for VAT on Time
If your food business turnover exceeds £90,000 in any rolling 12-month period, you must register for VAT. Many small cafe and takeaway owners miss this threshold and end up with backdated VAT liabilities and penalties.
How Should You Manage VAT on Food as a Small Business?
Here are practical steps to stay on top of your VAT obligations:
- Use accounting software that allows you to assign VAT rates to individual products (e.g., Xero, QuickBooks, FreeAgent).
- Review your product list and categorise each item as 0%, 20%, or exempt based on HMRC guidance.
- Configure your EPOS or till system to apply the correct rate automatically.
- Keep records of all sales, broken down by VAT category.
- File your VAT returns accurately on time, late filing leads to surcharges.
- If you are unsure about a specific food item’s VAT treatment, check HMRC’s VAT Notice 701/14 on food.
| Need help with VAT registration, VAT returns, or understanding which of your food products are VAT-rated? Our team at Micro Entity Accounts specialises in helping food businesses get their tax obligations right. |
Summary of VAT on Food and Drink in the UK
Understanding VAT on food does not have to be overwhelming. Here is a quick summary of everything covered in this guide:
| Category | VAT Rate | Examples |
| Basic food groceries | 0% | Bread, meat, veg, dairy, eggs |
| Cold takeaway food | 0% | Cold sandwich, cold salad, cold sushi |
| Hot food (any setting) | 20% | Hot chips, hot pasty, cooked meals |
| Restaurant meals (eat in) | 20% | All food consumed on premises |
| Confectionery & snacks | 20% | Sweets, crisps, ice cream |
| Prepared hot drinks | 20% | Coffee, tea, hot chocolate in a cafe |
| Coffee/tea as product | 0% | Ground coffee, tea bags to take home |
| Fizzy soft drinks | 20% | Coke, Pepsi, Fanta, energy drinks |
| Still water / pure juice | 0% | Bottled water, fresh orange juice |
| Alcohol (all types) | 20% | Beer, wine, spirits, cider |
The golden rule: if the food is hot, alcoholic, carbonated, or consumed on your premises – charge 20% VAT. If it is a basic, cold food item sold for someone to prepare or eat at home, it is likely zero-rated.
FAQs About VAT on Food
Is there VAT on food items in the UK?
Yes, but most basic food items are zero-rated (0%) rather than exempt. Hot food, alcohol, confectionery, and fizzy drinks are charged at the standard 20% rate.
Is VAT on food 20%?
Not always. Basic groceries are 0% VAT. Hot food, snacks, confectionery, and alcoholic and carbonated drinks are charged at 20%. The rate you apply depends on what you sell and how you sell it.
What food is 5% VAT?
In standard practice, no everyday food item is currently charged at 5% VAT. The 5% reduced rate was applied temporarily to the hospitality sector in 2020-2021 as part of COVID-19 relief measures but has since reverted to 20%.
What food items do not have VAT?
Most basic food items for human consumption are zero-rated: bread, meat, fish, fruit, vegetables, dairy, eggs, cereals, and cold packaged foods. These have a 0% VAT rate.
Do you have to pay VAT on drinks?
It depends on the drink. Still water, pure fruit juice, and unprepared tea and coffee are zero-rated (0%). Fizzy drinks, alcohol, and hot prepared drinks are charged at 20% VAT.
Is there VAT on a can of Coke?
Yes. A can of Coca-Cola or any other carbonated drink is charged at the standard 20% VAT rate. Carbonated soft drinks are not eligible for zero-rating under HMRC rules.
Is coffee 20% VAT?
It depends. Coffee beans or ground coffee sold as a product are zero-rated (0%). A prepared cup of hot coffee served in a cafe or as a takeaway is 20% VAT because it is a hot drink prepared for immediate consumption.
Is VAT on alcohol 20%?
Yes. All alcoholic beverages in the UK are charged at 20% VAT. There are no exceptions. Alcohol is also subject to separate Alcohol Duty (excise duty) on top of VAT.
Need Help With VAT for Your Food Business?
VAT rules for food can be genuinely tricky, especially when you sell a mix of hot and cold items, or run a cafe that also has a retail counter. Getting it wrong can mean paying too much VAT, or worse, underpaying and facing HMRC penalties.
At Micro Entity Accounts, we help small businesses, sole traders, and micro entity companies navigate the UK tax system, including VAT registration, VAT returns, and food-specific VAT advice. If you would like expert support, visit microentityaccounts.com and get in touch with our team today.
Disclaimer: The content on MicroEntityAccounts is for informational purposes only and do not constitute tax or financial advice. We recommend consulting a certified tax professional or the HM Revenue and Customs Dept (HMRC) for accurate guidance. MicroEntityAccounts is not responsible for any decisions made based on the information provided.
