VAT on Food and Drink in the UK: Full Breakdown

Ask most small business owners about VAT on food & drink in the UK and you’ll likely get a wince instead of a straight answer.

On paper, the rule sounds simple: food and drink for human consumption is mostly zero-rated. However, in practice, there’s a long list of exceptions, including confectionery, soft drinks, hot takeaways, and anything eaten on the premises.

In fact, there’s so much confusion on the topic that it’s resulted in a number of high profile court cases.

The basic rule: mostly zero, but a lot of exceptions

Under the VAT Act 1994, most food and drink sold for human consumption is zero-rated, meaning you charge nothing on top and still reclaim the VAT on your costs. That covers the obvious things like bread, meat, fish, vegetables, tea, coffee beans, milk, and most tins or packets from the supermarket.

The catch is that the same piece of legislation lists a set of “excepted items” that are ineligible for zero-rating and put into the standard 20% rate bracket instead. These exceptions were created to try and draw a distinction between what counted as an everyday necessity and what counted as a treat, a drink, or a meal out.

However, how we live, shop and eat has changed significantly since these exemptions were drawn up, and as a result, a simple sandwich shop might find itself in a position where they need to apply three different VAT rates to three near-identical products sold from the same counter.

If you want to check the actual tax on any individual sale, the Standard VAT Calculator will do the sum once you know which side of the line an item falls on.

What’s always standard-rated

Seven categories sit outside zero-rating no matter who sells them or how plainly they’re marketed as food:

Confectionery. Chocolate, sweets, and anything “wholly or partly covered in chocolate” is standard-rated, with cakes as the one carve-out. That carve-out produced the most famous VAT case in the UK. In 1991, HMRC decided Jaffa Cakes were biscuits and should be taxed at 20%. McVitie’s disagreed, baked a twelve-inch Jaffa Cake for the tribunal, and won on the grounds that the product goes hard when stale, like a cake, rather than soft, like a biscuit. Jaffa Cakes have been zero-rated ever since.
Crisps and savoury snacks. Crisps, popcorn, and similar salted snacks made from potato, cereal or nuts are standard-rated, even though they’re sold next to zero-rated nuts and dried fruit, and this boundary still gets tested regularly. In 2025, the Upper Tribunal ruled against Walkers over its Sensations Poppadoms, finding that a product built from around 40% potato granules and starch was close enough to a crisp to be taxed as one, whatever the packet called it.
Ice cream. Ice cream, ice lollies, and similar frozen confectionery are standard-rated, including the ice cream van parked outside the zero-rated supermarket.
Soft drinks. Most bottled and canned drinks, including fruit juices, carbonated drinks and bottled water, are standard-rated. Plain tap water is zero-rated. While milk itself is generally treated as food rather than a soft drink, milk-based drinks such as milkshakes sit close enough to the line that it’s worth checking the current position for a specific product before pricing a menu around it.
Alcoholic drinks. Beer, wine and spirits are standard-rated whether sold from an off-licence or a bar, on top of any duty already built into the price.
Catering. Any food or drink supplied “in the course of catering” is standard-rated, which in practice means anything sold for consumption on your premises, hot or cold.
Hot takeaway food. Food that’s heated and sold to be eaten hot, even off the premises, is standard-rated. This is the category that causes the most disputes, which is why we’ve given it a dedicated section below.

The “hot food” test, and the cases that shaped it

HMRC’s test for hot food doesn’t ask whether the food is warm, but why it’s warm. Under the legislation, food counts as “hot” for VAT purposes if any one of the following applies:

It has been heated so it can be eaten hot
It’s above the surrounding air temperature at the point of sale
It’s been kept warm after cooking
It’s advertised or marketed as hot food

Meet any one of those tests and the standard rate applies, regardless of whether the item would have been zero-rated if sold cold.

The case behind this definition was brought by Subway. In Sub One Ltd (t/a Subway) v HMRC, a Yorkshire franchisee argued that toasting a sandwich or heating a meatball marinara filling wasn’t the same as selling “hot food”. The sub was heated to melt the cheese and crisp the bread, not specifically to be served hot.

The First-tier Tribunal disagreed in 2010, the Upper Tribunal disagreed again in 2012, and the Court of Appeal closed the door for good in 2014. The ruling meant the toasted item was still hot food under the legislation even if warming it up wasn’t the seller’s main purpose, because it would still be eaten warm. Around 1,200 other Subway franchisees had appeals riding on the outcome.

There’s an exception to this, however. In the 2012 Budget, then-Chancellor George Osborne proposed taxing all hot takeaway food at the standard rate, however it got hot, which would have caught a pasty simply cooling on a bakery shelf.

Greggs led the public backlash, with the press dubbing it the “pasty tax”, and the government partially reversed the plan within weeks. The compromise still holds today and food that’s naturally hot from baking, and simply left to cool at its own pace rather than kept warm on purpose, stays zero-rated even while it’s still warm when sold.

HMRC’s own guidance still uses a Cornish pasty, baked off and cooling naturally on the shelf, as its worked example of this rule. Put the same pasty under a heat lamp or a hot cabinet instead, and it crosses back into standard-rated territory.

This is the distinction that lets some high-street bakery chains sell a warm pasty at 0% while a takeaway selling a reheated one next door charges 20%, and it’s also why HMRC pays close attention to how food is displayed, not just what temperature it happens to be.

Is any food ever reduced-rated?

Not really, but outdated advice on this still exists. There’s no ongoing 5% VAT category for food itself. Two temporary schemes get confused with a permanent rule, and both have now expired.

During the pandemic, the government cut VAT on eat-in food and non-alcoholic drinks to 5% from July 2020, stepping it up to 12.5% from October 2021, before the whole relief ended on 31 March 2022. If you find an article, guide or blog post quoting 5% or 12.5% VAT on a restaurant meal, check the date.

More recently, the “Great British Summer Savings” scheme applied a temporary 5% rate specifically to children’s meals eaten in restaurants (plus family tickets and attractions) between 25 June and 1 September 2026, but that window has now closed and the rate on those meals is back to 20%. Neither scheme created a lasting reduced rate for food generally, and unless you’re reading a dated news story, you should assume the rate is either 20% or 0%.

Example: running a café till that sells both

In a small deli selling takeaway lunches, a cold ham sandwich, wrapped and sold to go is zero-rated. No VAT is charged, and the till records it at 0%. A flat white made to order is standard-rated, because hot drinks are always taxed as hot food regardless of how you sell them, so a £3.20 flat white already has 20% VAT baked into that price. And a toasted panini falls under the hot food rules too, because it’s heated specifically to be eaten hot, so a £5.00 panini also carries VAT at the standard rate.

However, sell that same cold sandwich to a customer who sits down at one of your tables instead of taking it away and the picture changes. Under the catering rule, anything consumed on your premises is standard-rated regardless of temperature, so a sandwich that was zero-rated a moment ago becomes standard-rated the second someone sits down to eat it.

Three products, two rates, one till.

The way this actually gets handled is with separate product codes, every item on the till is assigned a VAT rate when it’s set up, so a barista scanning a sandwich and a panini back to back doesn’t need to think about VAT at all because the system already knows, providing the owner has set everything up correctly.

Checking a specific menu price against the rate it should carry is exactly what our Standard VAT Calculator and VAT-Inclusive Pricing Calculator are for, particularly when working out how much of a listed price is actually VAT.

Running a mixed till without an HMRC headache

Two practical habits keep a mixed-rate menu manageable. First, assign the VAT rate at the point you add or change a product on the till, not at the point of sale, and review it whenever a supplier or recipe changes, because reheating a previously cold product or adding a hot filling could move an item into a different VAT band.

Second, where you sell combo deals or meal bundles that mix zero-rated and standard-rated items, such as a sandwich, crisps and a drink, HMRC expects you to apportion the VAT across the bundle rather than apply the lowest rate to the whole thing, usually based on each item’s normal selling price.

When HMRC looks at a food or drink business, they typically focus on the same areas. Whether “takeaway” sales are genuinely eaten off the premises rather than at a table provided, whether food marketed as fresh and warm is being kept hot deliberately, whether bakery items sit on the cake or biscuit side of the product borderline, and whether the VAT declared on standard-rated sales roughly matches what you’d expect from your ingredient and stock purchases.

That last check works in both directions. If you’re buying in ingredients and want to confirm a supplier has charged VAT correctly on an invoice, our Reverse VAT Calculator will find the figure from the VAT-inclusive total.

Frequently asked questions

Is food VAT free in the UK? Most everyday food and drink sold for human consumption is zero-rated, which means no VAT is added, rather than exempt. The distinction matters for the business selling it, since zero-rated sellers can still reclaim VAT on their costs. A wide list of exceptions, including confectionery, crisps, ice cream, soft drinks, alcohol, and anything sold hot or for eating on the premises, is taxed at the full 20% standard rate instead. Whether a specific product is “VAT free” depends on what it is and how it’s sold, not just that it’s edible.

What is VAT on takeaway food? Cold takeaway food is usually zero-rated, the same as an equivalent item bought in a supermarket. Hot takeaway food is standard-rated at 20% if it’s been heated to be eaten hot, is above the surrounding air temperature when sold, has been kept warm on purpose, or is marketed as a hot item. Food that’s naturally warm from baking and simply cooling on an open shelf, rather than being kept hot deliberately, can qualify for zero-rating. The seller’s intention behind the heating, not the temperature alone, decides the rate.

Are all cakes and biscuits zero-rated? Cakes are zero-rated, and most plain biscuits are too, but a chocolate-covered or chocolate-coated biscuit is standard-rated as confectionery. The borderline between a cake and a biscuit isn’t defined in the legislation itself, which is why HMRC and manufacturers have gone to tribunal over specific products. Texture, ingredients, and how the product behaves when it goes stale are all considerations. If your product doesn’t obviously fit either category, it’s worth getting advice before assuming a rate.

Do I pay VAT on a coffee? Yes, always, whatever form it takes as a drink. A hot coffee served by a café or bought from a machine is standard-rated because hot drinks are treated the same as hot food under VAT law. Even an iced coffee bought to take away is standard-rated, since soft drinks are an excepted item in their own right rather than benefiting from the cold food rules. The one part of the coffee supply chain that stays zero-rated is unroasted or roasted coffee beans and ground coffee sold for someone to brew at home.

Does alcohol get taxed differently in a shop compared with a pub? No, alcoholic drinks are standard-rated at 20% wherever they’re sold, whether that’s a supermarket, an off-licence, a restaurant or a pub. What differs is duty, a separate tax charged per unit of alcohol before VAT is even calculated, which is built into the shelf or menu price. A pub meal that includes a drink will usually show a higher effective tax burden than the same drink bought to take home, but that’s the combined effect of duty and VAT together, not a special VAT rate for licensed premises.

How do I know if my food business needs to register for VAT? Registration depends on your VAT-taxable turnover, which includes standard-rated and zero-rated sales added together, not just the sales you charge VAT on. Once that turnover passes the registration threshold, £90,000 in any rolling twelve-month period, or you expect it to within the next thirty days, registration becomes compulsory.

The threshold does get reviewed from time to time, so it’s worth checking the current figure on gov.uk rather than assuming it stays fixed. A food business selling mostly zero-rated groceries can cross the threshold just as easily as one selling standard-rated meals, since zero-rated sales still count towards the total, even though no VAT gets charged on them.

In short

Most food and drink for human consumption is zero-rated in the UK, but confectionery, crisps, ice cream, soft drinks, alcohol, and anything sold hot or eaten on your premises is taxed at the standard 20% rate instead. The “hot food” test relates to intention, not temperature, and there are real financial consequences for businesses that get it wrong. If you run a food business with a mixed menu, the next step is to check every product on your till against these categories rather than assuming, since the cost of getting one item wrong could show up at your next VAT return.