VAT on restaurant bills in the UK

Before you read

This guide is general information, not tax advice. It links each rule to the GOV.UK page it comes from and the day we read it. VAT has many edge cases, and HMRC's notice is the authority — check your own menu with your accountant.

The rates

The UK has three VAT rates: 20% standard (most goods and services), 5% reduced, and 0% zero (for example, most food).^[1] Food in a shop is often zero-rated, which is why people are sometimes surprised that a restaurant meal is not.

Eating in: always standard-rated

HMRC's catering notice is plain about it: VAT must always be charged at the standard rate on food and drink supplied for consumption on the premises.^[2] A plate of food eaten at your tables, a coffee drunk at the counter, a cake eaten in your seating area — all 20%.

Takeaway: hot, cold and the exceptions

Takeaway is where it gets detailed. Hot takeaway food and drink that meets HMRC's tests is standard-rated; cold takeaway food and drink is zero-rated unless it is of a type that is always standard-rated (such as crisps, sweets and some drinks including bottled water); and hot takeaway drinks are standard-rated.^[3]

So a café might sell:

• a toasted sandwich to eat in: standard-rated;
• the same toasted sandwich to take away, if it meets the hot food tests: standard-rated;
• a cold sandwich to take away: zero-rated;
• a bottle of water to take away: standard-rated;
• a hot coffee to take away: standard-rated.

The notice explains the hot food tests in detail. If your menu has items on the edge — food kept warm, food heated to order, food that cools while it waits — read that section with your accountant and decide item by item.

Service charges and tips

The same notice says a service charge you make is standard-rated, but no VAT is due on a tip the customer freely gives above your total charge.^[4] Put simply: a service charge printed on the bill as part of what the guest owes carries VAT; a tip the guest chooses to add does not.

Since 1 October 2024 there is also a law on who keeps tips: employers in England, Scotland and Wales must pass on all tips and service charges to workers without deductions, except in very limited cases such as deducting income tax, by the end of the month after customers paid them.^[5] Our guide to service charges and tips goes through the rest of that code.

When you must register

A business must register for VAT if its total taxable turnover for the last 12 months goes over £90,000.^[6] Below that, a restaurant that is not registered charges no VAT and its bills show no VAT lines.

The VAT receipt

Guests on business often ask for a VAT receipt. HMRC's VAT guide says a retailer should give a VAT invoice when a customer asks for one; for a sale of £250 or less, a retailer's VAT invoice may show just the seller's name, address and VAT number, the time of supply, a description, and for each VAT rate the total including VAT and the rate.^[7] A clear POS receipt with those lines covers a restaurant bill of £250 or less.

Prices that include VAT

When menu prices include VAT, the price on the menu is what the guest pays, and the VAT is worked out backwards from it: on a £12.00 standard-rated dish, the VAT inside it is £2.00. Whichever way you write your prices, write them the same way on the menu and in your POS.

Setting it up in BillDine

What BillDine does for a UK restaurant today:

• Rates ready. In quick start, tick that your business is registered for VAT, type your VAT number (BillDine checks it reads like GB123456789) and keep the usual rates ticked: BillDine adds VAT 20% and VAT 0%. Later you can add them from Settings → Billing rules → Taxes → Ready-made taxes.
• Prices include VAT. A new UK outlet includes tax in menu prices, and the bill shows the VAT inside the total.
• Takeaway at a different rate. A dish's Takeaway & delivery tax lets a cold takeaway item be billed at VAT 0% on takeaway and delivery orders while it stays 20% eaten in.
• Not registered? Choose Not registered for VAT in Business details: no VAT is charged, no number is printed, and bills are titled "Bill".
• The receipt's lines. The receipt template prints your legal name, address, phone and VAT number, and the bill shows each VAT rate with its amount. Any guest can be handed or sent the bill again; every later copy is marked DUPLICATE. See printing.
• Service charge and tips. A service charge is a charge you add, with its own tax group (VAT 20%) or none, and staff can remove it from a single bill. Tips the guest adds at payment are recorded as tips, never as sales, and the payments report shows them apart.
• For your return. The tax report shows VAT by rate for any period, with credit notes taking their VAT off; every report exports as CSV or PDF. See reports.

A short checklist

1. Check your turnover against the registration threshold.
2. Mark which takeaway items are zero-rated and which are standard-rated, using HMRC's notice.
3. Give the zero-rated ones a 0% takeaway rate.
4. Decide whether you add a service charge; if you do, it carries VAT.
5. Write a tipping policy and pass on tips as the law requires.
6. Print a test receipt and check it has the VAT receipt lines.