Is there VAT on postage? Let’s stamp out any confusion

VAT on postal services can be surprisingly tricky – especially when different services have different tax rules.

In the UK, basic postal services like 1st and 2nd class stamps are VAT‑exempt under Royal Mail’s universal service obligation. However, parcel deliveries, courier services and international shipments often carry VAT – sometimes at the same rate as the goods being sent.

Understanding when VAT applies, and how it affects both businesses and consumers, can help avoid surprises and ensure proper accounting. Whether you’re managing an online store or just curious about postage charges, here’s what you need to know about VAT postage.

Key takeaways:

• Universal postal services – Standard Royal Mail services such as 1st and 2nd class stamps, Special Delivery (stamps and franking) and certain international mail – are exempt from VAT, making them simpler for both consumers and businesses.
• When sending parcels, the VAT charged on delivery generally matches the VAT applied to the product being shipped – so zero-rated goods remain VAT-exempt, while standard-rated items carry VAT on the delivery charge.
• Sending goods outside the UK can result in zero-rated VAT if the supply is exported, but you may need to register for VAT or other taxes in the destination country. Receiving goods from abroad may incur VAT, depending on the value and type of goods.
• Businesses need to account for VAT on delivery charges when calculating costs, pricing products and managing cash flow. Proper record-keeping allows VAT-registered businesses to reclaim eligible VAT on postage through their VAT returns.

Is there VAT on Royal Mail postage?

The answer is yes and no. When it comes to traditional postage stamps in the UK, the service provided by Royal Mail under its universal postal service obligation remains VAT‑exempt. That means ordinary 1st and 2nd class stamps fall outside VAT.

However, when you use non‑universal services (for example parcel delivery, specialist courier services or any postal service not covered by the regulated universal service obligation), these will often be standard‑rated for VAT.

The VAT liability of the delivery service usually follows the liability of the goods being sent – so if you’re selling standard‑rated goods and charging for delivery, you’ll need to account for VAT on the delivery charge as well.

In short:

• If a service is a regulated universal postal service (e.g., standard letter stamps), it’s VAT‑exempt.
• If the service falls outside that remit (e.g., parcel delivery, courier services), you’ll likely need to charge VAT.
• If you deliver goods as part of the supply and delivery is built into the price, the VAT rate of the item determines the VAT treatment of the delivery.

To make it easier to visualise, here’s a table of postal services and VAT regulations in the UK:

As always, you should check the specific service you use and the underlying goods you supply to confirm the correct VAT treatment.

What are the VAT rates for postage?

VAT rates for parcels and postage reflect the VAT rate of the item you’re sending. For example if you’re sending a coffee machine that has a VAT rate of 20% you’ll also have to charge 20% VAT on the cost of postage.

Current VAT rates in the UK are:

• The standard rate of VAT at 20%
• Zero-rate VAT at 0%

You may also have heard of reduced rate VAT – a 5% rate introduced during the pandemic for certain goods and services deemed ‘essential’. This rate is no longer applicable.

The UK government calculates VAT rates based on goals like boosting the economy or funding public services. They pass laws in Parliament, consider economic conditions and may adjust rates for political reasons. Before Brexit, EU regulations also influenced VAT rates. 

Need to work out the tax on a pile of stamps? Our online VAT tool does the math for you.

Are there any VAT exemptions on postage?

Royal Mail services provided under the universal postal service obligation are generally exempt from VAT. The full, up-to-date list of Royal Mail services and their VAT status is available on the Royal Mail website. For official VAT rules, HMRC’s guidance can be found in Notice 700/24.

At the time of writing, Royal Mail products that are exempt from VAT include:

UK services

• 1st and 2nd Class (stamps, online, franking, account)
• Special Delivery Guaranteed™ (stamps and franking)
• Royal Mail Signed For™ (if purchased with a VAT exempt service)
• Keepsafe™ (personal and business)

International services

• International Standard
• International Economy
• International Signed and International Tracked & Signed
• All HM Forces Mail (BFPO)

Inbound Mail

• Redirections within UK (personal and business)

Remember: VAT can only be added to postage if the underlying goods are subject to VAT. So if you're delivering zero-rated goods, you can't charge VAT on the shipping costs, though you must still keep a record of it for accounting purposes.

You might also be interested in: Is there VAT on train tickets in the UK?

What are the VAT implications for international postage?

VAT on international postage depends on whether you’re sending or receiving goods.

On their website HMRC explains so long as the ‘place of supply’ is the UK, and the transport of goods is to a place outside of the UK, then the VAT on international postage items will be zero rated. Be aware that you may need to register for VAT or a similar tax in the country where you’re making the supply.

This means you have to follow the tax rules of that country and pay the applicable taxes. To get specific guidance and information about the requirements, it's important to reach out to the relevant authorities in that country.

Receiving goods from outside the UK

​​When goods arrive from outside the UK, brace yourself for VAT charges imposed by the government. Gifts worth £39 or less are exempt, aside from excise goods like alcohol and tobacco, which are VAT magnets.

To settle the VAT, you have two options:

1. Pay when purchasing the goods
2. Let the delivery company collect the VAT

Should there be any VAT, duty or delivery charges, expect a message from Royal Mail, Parcelforce, or the courier company. They'll send a detailed bill outlining the fees to be paid.

Postal services and EU VAT

If you're selling items to the EU from England, Scotland or Wales, they’re subject to European VAT and customs rules. You can use the Import One Stop Shop (IOSS) or the Royal Mail’s Postal Delivery Duties Paid Solution (RDDP) that cover postal services and EU VAT costs.

Under the IOSS scheme, buyers can pay VAT at the time of purchase for items worth up to €150. This means they won't have to pay VAT upon delivery. Joining the IOSS is not mandatory, but it does allow a company to streamline their VAT and tax processes when selling in the EU.

Alternatively, businesses can use the PDDP scheme. This allows Royal Mail and an overseas delivery partner to handle duties and VAT in advance so the end consumer doesn’t have to pay unexpected extras on the doorstep.

How do postage costs and VAT affect businesses?

VAT implications for postage influence businesses when they’re deciding on prices for their products and how they manage cash flow. The sneaky extra cost of VAT on certain kinds of postage affects profit margins, and is something businesses need to keep an eye on if they want to stay in the green.

VAT registered businesses may be able to get some money back (input VAT) on the VAT they pay for postage, which will help reduce their overall VAT bill. But they must consider how it will affect their cash flow and keep records of VAT transactions, like invoices and receipts for postage, to avoid penalties.

For consumers, postage costs and VAT mean having VAT applicable items delivered to their door is always going to be a bit more expensive.

How can businesses claim VAT refunds on postage expenses?

Businesses claim all VAT refunds on postage by completing the appropriate sections on their VAT return. If the amount of VAT you’re claiming exceeds the amount of VAT you owe, then the government will pay you back the difference in the form of a VAT refund.

In practice, this looks like:

1. Making sure you’re VAT registered.
2. Ensuring you have valid VAT invoices for all your postage expenses.
3. Keeping accurate records of your input VAT.
4. Filing your VAT returns on time and including postage costs.

You’ll then receive a VAT refund that includes postage expenses if you’ve shelled out more on VAT for things you’ve had to buy as a business, vs things you’ve sold as a business.

Remember that to be eligible for a refund you must meet all the necessary VAT compliance rules and regulations. HMRC may review your VAT refund claim, and request additional documentation or information to support your claim. So it's important to maintain accurate records and be prepared to provide any relevant documentation.

How Pleo can help with VAT on postage expenses

Managing expenses, including VAT on postage, can be a challenge for lots of businesses. Here are some ways Pleo can help:

• Receipt upload and storage: With Pleo, employees can easily upload receipts for postage expenses and store them in the app. This makes it easy to track expenses and ensure that all VAT is accounted for.
• Expense categorisation: Pleo allows businesses to categorise expenses, including postage, by project, department or any other custom category. This makes it easy to track and allocate expenses for VAT purposes.

Try Pleo to save time, reduce errors and ensure compliance with VAT regulations today!