If you run a cafe, restaurant, pub, takeaway or food shop, VAT is rarely as simple as "food has no VAT". A cold sandwich eaten at a table is taxed differently from the same sandwich taken away. A flapjack and a chocolate biscuit can sit on the same shelf and carry different rates. Get the split wrong and you either overcharge customers or hand HMRC a backdated bill.
This guide breaks down how VAT actually applies to food, drink and hospitality. We'll cover the three rates, the all-important "eat-in" rule, the tests for hot takeaway food, the snacks and drinks that are always standard-rated, and a worked example you can map onto your own till.
It's written for UK food and hospitality businesses, and the figures are for the 2026/27 tax year. We also cover VAT on service charges and tips, how VAT works when you sell through delivery apps like Deliveroo and Just Eat, and the temporary 5% summer rate that ran from 25 June to 1 September 2026 on children's meals eaten in and admission to family attractions.
What are the VAT rates on food and drink?
There are three VAT rates in the UK, and food and hospitality businesses deal with two of them most days.
VAT on food in the UK is usually zero-rated for cold groceries and basic food, which means you charge 0%. It jumps to the standard 20% rate when food is sold as catering (eaten in), when it is hot takeaway that meets one of HMRC's tests, or when it is an excepted item such as a drink, confectionery, crisps or ice cream.
| Rate | Percentage | Typical food and drink examples |
|---|---|---|
| Standard | 20% | Catering, eat-in meals, hot takeaway, alcohol, soft drinks, crisps, confectionery |
| Reduced | 5% | Domestic energy. A temporary 5% rate also ran on children's meals eaten in and family-attraction admission from 25 Jun to 1 Sep 2026 (now ended) |
| Zero | 0% | Most cold groceries: bread, milk, plain biscuits, cakes, fruit, raw meat |
Rates verified against gov.uk VAT rates.
A quick word on the reduced rate. During the pandemic the government temporarily applied a reduced rate to much hospitality and catering. That temporary relief ended on 31 March 2022, and the rate on those supplies returned to the standard 20%. So if you read older guidance mentioning 5% or 12.5% on restaurant meals, that no longer applies to ordinary catering. For most food sales, your two options are still 20% or 0%.
Was there a temporary 5% VAT rate in summer 2026?
Yes. From 25 June to 1 September 2026 inclusive, HMRC's Great British Summer Savings scheme applied a temporary 5% rate to children's meals eaten on the premises and to admission charges at family attractions such as soft play centres, zoos, aquariums and museums. Ordinary adult meals, takeaways and any meal including alcohol stayed at their normal rate, and everything reverted to its usual VAT liability from 2 September 2026. If you run a cafe with a genuine children's menu or a family attraction, our guide to the temporary 5% VAT on children's meals and attractions sets out exactly what qualified and how the till should have been set.
Is all food zero-rated for VAT?
No, and this is the single biggest misconception we see. The starting point in the legislation is that most food for human consumption is zero-rated. But there's a long list of exceptions that are pulled back up to the standard 20% rate.
Broadly, food becomes standard-rated when it falls into one of these buckets:
- It's supplied in the course of catering (which includes eating in and hot takeaway).
- It's a specific excepted item, such as confectionery, crisps and other savoury snacks, ice cream, or most drinks.
So a loaf of bread from a bakery shelf is zero-rated. The same bakery's hot sausage roll kept warm under a heat lamp is standard-rated. The food itself hasn't changed much. What's changed is how it's sold.
Do I charge VAT on eat-in food?
Yes. If a customer eats or drinks on your premises, you charge VAT at 20% on that sale, regardless of whether the item is hot or cold.
This is the catering rule. HMRC treats anything consumed on the premises as a supply "in the course of catering", and catering is always standard-rated. A cold tuna sandwich is zero-rated if someone takes it away, but 20% the moment they sit at your table to eat it.
"Premises" is wider than just the inside of your shop. It includes any area you've set aside for customers to eat, such as:
- Tables and chairs on a patio next to your unit.
- Shared seating in a food court that your customers can use.
- A supermarket's seating area, inside or outside the store.
It does not include general public seating that isn't there specifically for your customers, such as benches in an airport terminal. The test is whether the seating is provided for the consumption of your food.
Is takeaway food subject to VAT?
It depends on temperature. Cold takeaway food is usually zero-rated. Hot takeaway food is usually standard-rated.
When is hot takeaway food standard-rated?
Hot takeaway food is standard-rated if it's hot at the point of sale (above the surrounding air temperature) and it meets at least one of these five tests:
- It's been heated so the customer can eat it hot.
- It's been heated to order.
- It's kept hot after cooking, for example under a heat lamp or on a spit.
- It's provided in heat-retaining packaging, such as a foil bag or insulated box.
- It's advertised or marketed as being supplied hot.
If a product ticks any one of those, the hot takeaway sale is 20%. A hot rotisserie chicken kept warm in the cabinet is standard-rated. A loaf that's warm simply because it's just come out of the oven, sold to cool and eat later, is not caught by the "freshly baked" point and stays zero-rated.
What about cold takeaway food?
Cold food taken away is zero-rated, with one big caveat: it must not be an item that's always standard-rated in its own right. A cold meal-deal sandwich taken away is zero-rated. A cold can of cola or a bag of crisps taken away is still 20%, because drinks and crisps are excepted items (see the next section).
Which food and drink is always standard-rated?
Some items carry 20% VAT no matter how they're sold, hot or cold, eat-in or takeaway. These are the excepted items. The common ones for food businesses are:
- Most drinks. Alcohol is always 20%. Soft drinks, bottled water, and energy or sports drinks are standard-rated. Hot drinks like tea and coffee served to a customer are standard-rated too.
- Confectionery. Sweets, chocolate bars and chocolate-covered biscuits are 20%.
- Crisps and savoury snacks. Potato crisps, similar packaged snacks, and roasted or salted nuts are standard-rated.
- Ice cream and similar. Anything designed to be eaten while frozen is 20%.
A note on the famous cake-versus-biscuit line. Cakes and plain biscuits are zero-rated as food. A biscuit wholly or partly covered in chocolate is standard-rated. The reason a Jaffa Cake is zero-rated is that HMRC accepts it's a cake, not a chocolate-covered biscuit. It sounds trivial, but for a bakery selling thousands of units a week the rate difference is real money.
If your range straddles these lines, our tax advisory team can map each product to the right rate so your till is set up correctly from day one.
Do I charge VAT on a service charge or tip?
It depends on whether the customer has to pay it. A compulsory service charge is part of the payment for the meal, so it takes the same VAT rate as the food, which for eat-in catering is 20%. A genuinely optional service charge, and any freely given tip, is outside the scope of VAT.
HMRC's position is set out in its VAT manual on tips, gratuities and service charges:
- Optional service charge (the customer can decline it, even when it is printed on the bill): outside the scope of VAT, so no VAT is due.
- Compulsory service charge (the customer must pay it): standard-rated at 20%, because it follows the catering supply.
- Tips and gratuities given freely by the customer: outside the scope of VAT, however they are paid.
The VAT treatment is separate from how tips are handled for PAYE, National Insurance and the tronc rules. Our guide to restaurant accounting, tronc and tips covers how a tronc keeps qualifying tips outside National Insurance.
How does VAT work on delivery apps like Deliveroo and Just Eat?
When you sell through a delivery app you are still the one supplying the food to the customer, so you account for VAT on the full sale at the normal rate: hot food delivered is standard-rated at 20%. The app charges you commission plus 20% VAT, which you can reclaim as input tax.
Two things trip restaurants up here:
- You account for VAT on the gross sale, not on what the app pays you. The commission the platform deducts is its charge to you, not a reduction in your sale. If a customer pays £24 for hot food through the app, your output VAT is one sixth of £24, which is £4.00, even though the app pays you less after commission.
- Reclaim the VAT on that commission. The platform's commission is a standard-rated service, so a VAT-registered restaurant can recover the 20% as input tax. Zero-rated food sales do not block this: zero-rated supplies are taxable at 0%, not exempt, so they do not restrict input VAT recovery.
Keep the app's monthly VAT invoices, because they are your evidence for the commission input tax. For a wider view of hospitality bookkeeping, see how we support hotels and restaurants.
Worked example: a cafe's mixed sale
Illustrative example. Sofia runs a small cafe and takeaway counter. A customer orders the following and takes everything away (no eat-in):
| Item | Treatment | Net price | VAT rate | VAT | Gross |
|---|---|---|---|---|---|
| Cold prawn sandwich (takeaway) | Zero-rated cold food | £4.00 | 0% | £0.00 | £4.00 |
| Hot sausage roll (kept hot) | Standard-rated hot takeaway | £2.50 | 20% | £0.50 | £3.00 |
| Can of cola | Excepted item (drink) | £1.20 | 20% | £0.24 | £1.44 |
| Plain shortbread biscuit | Zero-rated food | £1.00 | 0% | £0.00 | £1.00 |
| Totals | £8.70 | £0.74 | £9.44 |
The maths: VAT is £0.50 + £0.24 = £0.74. Net is £4.00 + £2.50 + £1.20 + £1.00 = £8.70. Gross is £8.70 + £0.74 = £9.44.
Now imagine the same customer sits down to eat in. The catering rule kicks in, so the cold sandwich and the biscuit also become standard-rated. VAT on the order would then be 20% of the whole £8.70, which is £1.74, not £0.74. Same products, very different VAT, purely because of where they're eaten. That's exactly why your point-of-sale needs an eat-in button.
Quick decision steps for your till
When you're unsure of the rate on a sale, work through these in order:
- Is it eaten on the premises? If yes, it's 20%. Stop here.
- Is the item always standard-rated? Drinks, confectionery, crisps and ice cream are 20% regardless. If yes, stop here.
- Is it hot takeaway that meets a hot-food test? If yes, it's 20%.
- Otherwise it's cold takeaway food. Zero-rated.
Building these rules into your point-of-sale and your bookkeeping is the practical bit. Accurate daily coding is what makes a clean VAT return possible later, which is where solid bookkeeping support earns its keep for hospitality businesses.
When do I have to register for VAT?
You must register for VAT once your VAT-taxable turnover goes over the registration threshold of £90,000 in any rolling 12-month period, or if you expect to cross it in the next 30 days. The current threshold is set out on gov.uk.
One catch for food businesses: zero-rated sales still count as taxable turnover for the threshold. So a busy bakery selling mostly zero-rated bread can still be required to register even though much of what it sells carries no VAT. Once registered, the upside is you can usually reclaim VAT on your costs.
Where to read more
Once you have mapped your menu to the right rates, the next steps are registering and keeping clean records. Our guide on how to register for VAT walks through the process, and for sit-down venues our piece on restaurant accounting, tronc and tips covers how VAT applies to food and drink alongside staff tips. If you are weighing up how to account for that VAT once you register, our guide comparing the main UK VAT schemes shows how the Standard, Flat Rate, Cash and Annual Accounting options affect a hospitality business. If you would rather hand it over, our VAT returns and registration support keeps your filings accurate and on time.
Hospitality is a high-volume, low-margin sector, and travel and tourism operators face their own VAT quirks too. If you run a hotel or restaurant, see how we support hotels and restaurants; if you arrange trips and packages, our work with travel agencies covers the margin scheme issues that catch operators out.
Want certainty on what to charge? Book a free call with a Zmartly accountant and we'll review your menu, your till coding and your VAT position. Get in touch.
Frequently asked questions
Was there a temporary 5% VAT rate on food in summer 2026?
Yes, but only on a narrow list. From 25 June to 1 September 2026 inclusive, HMRC's Great British Summer Savings scheme applied 5% VAT to children's meals eaten on the premises and to admission at family attractions such as soft play centres, zoos and museums. Ordinary adult meals, takeaways and any meal including alcohol stayed at their normal rate, and everything reverted to 20% from 2 September 2026.
Do you pay VAT on a restaurant service charge?
A compulsory service charge is standard-rated at 20% because it forms part of the payment for the meal. A genuinely optional service charge, and any tip given freely by the customer, is outside the scope of VAT, so no VAT is due on it.
Do I charge VAT on food sold through Deliveroo or Just Eat?
Yes. You are still the supplier of the food, so you account for VAT on the full sale at the normal rate, and hot food delivered is standard-rated at 20%. The platform's commission carries 20% VAT that a VAT-registered restaurant can reclaim as input tax.
Is there VAT on food in the UK?
Most cold groceries and basic food are zero-rated, so you pay no VAT. Food becomes standard-rated at 20% when it is hot takeaway, eaten on the premises, or an excepted item such as confectionery, crisps, ice cream or any drink.
What is the VAT rate on restaurant meals?
Adult restaurant meals eaten in are standard-rated at 20% under the catering rule, hot or cold. The pandemic hospitality rate ended on 31 March 2022. Children's meals eaten in carried a temporary 5% rate from 25 June to 1 September 2026 under HMRC's Great British Summer Savings scheme, which has now ended, so they are back at their normal rate.
Is there VAT on takeaway coffee?
Yes. Hot drinks such as tea and coffee are standard-rated at 20% whether you drink them in or take them away. Drinks are excepted items, so the eat-in or takeaway distinction doesn't change the rate.
Do I charge VAT on a cold sandwich?
If the customer takes it away, a cold sandwich is zero-rated. If they eat it on your premises, it becomes standard-rated at 20% under the catering rule.
Why are some biscuits zero-rated and others 20%?
Plain biscuits and cakes are zero-rated as food. A biscuit that's wholly or partly covered in chocolate is treated as confectionery and is standard-rated at 20%. The classification of borderline products has been argued in court more than once.
Is hot food always standard-rated?
Hot food is standard-rated when it's hot at the point of sale and meets at least one of HMRC's five hot-food tests, such as being heated to order or kept hot under a lamp. Food that's merely still warm from baking, and sold to be eaten later, can stay zero-rated.
Does zero-rated food count towards the VAT registration threshold?
Yes. Zero-rated sales are still taxable supplies, so they count towards the £90,000 registration threshold. A business selling mostly zero-rated food can still be required to register.
Can I reclaim VAT on food I buy for my business?
Once you're VAT-registered, you can generally reclaim VAT on standard-rated business purchases, subject to the usual rules. There's no VAT to reclaim on zero-rated stock because none was charged.
