Is There VAT on Postage?

VAT on postage in the UK can be confusing. Some postal services are exempt, while others are standard-rated, depending on the provider and the nature of the delivery. If you're running a business or charging clients for shipping, it's important to understand when VAT applies and how to treat it correctly on invoices.

This guide explains when postage is VAT-exempt, when it's not, and how HMRC treats postal services for VAT purposes.

Is There VAT on Postage?

Not always. The VAT treatment of postage depends on:

• Who is providing the service

• Whether the service is part of a larger supply

• The method of delivery and how it’s billed

Royal Mail's universal service is VAT-exempt. However, postal services provided by other couriers, or additional delivery services beyond the universal service, are often subject to VAT.

Does Royal Mail Charge VAT?

Royal Mail’s universal postal services are VAT-exempt, meaning no VAT is added to standard services like:

• First and Second Class letters and parcels

• Special Delivery by 1pm

• Tracked 24 and Tracked 48 (under certain conditions)

These exemptions apply as long as:

• The service is part of the universal service obligation

• Prices are set by Ofcom or public tariff, not negotiated

• The service is available to the public at the same terms

If Royal Mail offers bespoke or business-priced services, those may attract VAT. For example, ParcelForce Worldwide, even though part of Royal Mail Group, is VAT standard-rated.

VAT and the Method of Delivery

If you use a courier or delivery company other than Royal Mail, the delivery charge is usually subject to 20% VAT. This includes companies like:

• DPD

• Yodel

• DHL

• Hermes (Evri)

• FedEx

• UPS

If you pass these charges on to your customer, you must apply VAT to the delivery cost in the same way you apply VAT to the goods, assuming you are VAT registered.

VAT and the ‘Delivered Goods’ Concept

When selling goods with delivery included, delivery is treated as part of the overall supply. This means:

• If the goods are standard-rated, the delivery is also standard-rated

• If the goods are zero-rated (e.g. certain books or children’s clothing), the delivery is also zero-rated

You cannot separate out delivery as VAT-exempt if it's part of the same taxable supply. This rule helps prevent businesses from avoiding VAT by breaking out postage separately.

Can I Reclaim VAT on Postage?

If you're VAT-registered and your business is charged VAT on delivery services (for example, courier services), you can reclaim this VAT as input tax, provided it relates to taxable business activity.

You cannot reclaim VAT on Royal Mail services that are VAT-exempt, as no VAT was charged in the first place.

Always check that the supplier is VAT-registered and provides a proper VAT invoice if you want to reclaim VAT.

How Should I Treat Postage on My Invoices?

If you're passing on delivery costs to customers:

• Use the same VAT rate as applied to the goods

• Don’t list Royal Mail charges as VAT-free unless the original supply was VAT-exempt

• Include VAT on delivery if you're using a standard-rated courier or the delivery is part of a taxable sale

This ensures your invoicing is compliant with HMRC’s VAT rules.

Final Thoughts

Whether or not VAT is charged on postage depends on the delivery provider and the type of service used. Royal Mail’s standard services are VAT-exempt, but most courier services are not. For businesses, it's important to know the difference, apply the correct rate, and ensure proper treatment on invoices and VAT returns.

Understanding these rules helps avoid HMRC errors, missed reclaims, or overcharging customers. If in doubt, always refer to HMRC’s guidance or speak to an accountant for advice on your specific situation.