Calculating Your UK VAT in a Post-Brexit World

2021 brings with it a lot of things, but one of the biggest developments affecting the United Kingdom is, of course, the Brexit deal that has finally been agreed with the European Union.  It’s been a long time in the making and many have debated its various implications. But now that it is here – we can start to unpack some of the real impacts on regular citizens like you and me.

Calculating Your UK VAT - image for article image adapted by Market Business News.

In the world of VAT and Customs Duty, the UK now joins the rest of the world in setting its own rules for dealing with Value-Added Tax (VAT) when goods are moving across borders.  Now that the country is no longer part of the EU Customs Union, there are a number of changes that come into play.  And it’s important that you are able to calculate your VAT correctly.

Duty-free shopping

For British travellers who are heading back and forth from the EU, there is some good news.  Duty-free shopping is now within your grasp.  As of 1 January 2021, passengers are now able to purchase duty-free alcohol, tobacco and other products from transport hubs across the country in much the same way that international visitors are able to do so.

This levels the playing field and potentially opens up some great deals for those who are able to take advantage of them.

Bad news for visitors to the UK

For those international visitors coming to the UK (this group now includes EU citizens of course), the news is not so positive.  The UK government announced that it would be scrapping the tax rebate that previously allowed international visitors to claim back the VAT they had paid at airports or other transport hubs.

Travellers will still be able to buy tax-free if they pay for the goods to be mailed back to their home countries, but this cost is usually prohibitive.  That’s why so many would carry the goods back with them in their personal luggage.  It’s a big shift.

This rebate encouraged huge amounts of tourism and so the decision has been quite controversial.  It’s clear to see that the move is an attempt to punish EU travellers as part of the shrewd negotiations between the UK and the EU – and it’s estimated that the move could raise up to £500m in additional tax revenue.  But the question is how much spending you forgo as a result – especially in a time where retailers have been, for the most part, decimated by the economic impacts of the COVID-19 pandemic.

Online VAT calculators

There are online VAT calculators that can assist with calculating VAT backwards or calculating VAT from gross, in these sorts of situations.  Using tools like this will ensure that you don’t get a nasty surprise when you see the final price.

Understanding how UK VAT is calculated is key for all travellers (and quite frankly all businesses operating in the travel space) – and this has never been truer as we enter this new post-Brexit world.  Whether you like it or not, Brexit has changed the VAT landscape forever.

Interesting related article: “What is Value Added Tax?