Is a charity exempt from VAT?

Not automatically. Charities pay VAT on most purchases, with reliefs for certain goods and services.

Do charity shops charge VAT?

Sales of donated goods can be zero-rated if conditions are met; bought-in stock is generally standard-rated.

Does a charity need to register for VAT?

Yes, once VAT-taxable turnover exceeds the threshold, and it can register voluntarily if it benefits.

Are donations subject to VAT?

Genuine donations are normally outside the scope of VAT.

VAT

Do Charities Pay VAT? Reliefs, Exemptions and Registration

Charities do not have a general exemption from VAT. They pay VAT on most purchases, but there are reliefs on some goods and services, and some income is outside VAT or exempt.

Last reviewed 10 November 2026 · Written by the Right Choice Consulting team

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Charities and VAT: the basics

Being a charity does not automatically exempt you from VAT. VAT depends on what a charity buys and sells.

Purchases: charities normally pay VAT, but a few goods and services are zero-rated or reduced-rated when bought for qualifying charitable purposes.
Income: donations and grants are usually outside the scope of VAT. Sales of goods or services are business activities and may be taxable or exempt.

Reliefs charities may use

Charities can often buy certain items at reduced or zero rates when the supplier has the right evidence, such as a declaration of eligibility. Examples include some medical and welfare equipment, certain advertising and building work for specific uses, and fuel and power for non-business use at the reduced rate. Whether a relief applies depends on the use of the item, so check the detailed HMRC conditions before relying on one.

Fundraising and trading

Some fundraising events can be exempt from VAT if they meet HMRC’s conditions. Selling donated goods in a charity shop is typically zero-rated. Trading activities, such as a café or paid training, are business activities, and standard-rated income counts towards the registration threshold of £90,000.

Charity activity	Usual VAT position
Donations and most grants	Outside the scope
Sale of donated goods in a shop	Often zero-rated if conditions are met
Qualifying fundraising events	Exempt, if HMRC conditions are met
Café, bookshop or training courses	Normally taxable, usually standard-rated

When must a charity register for VAT?

A charity must register when its VAT-taxable turnover exceeds the registration threshold, and it may choose to register voluntarily if it makes zero-rated supplies or wants to reclaim VAT. Mixed income can lead to partial exemption calculations, which limit how much VAT can be reclaimed.

Getting help

Charity VAT can be complicated, particularly where activities are mixed. We help charities in Harrow review their position, keep proper records and file accurate returns.

Sources

This article is general information based on UK rules as understood at the review date above. It is not personal tax or legal advice. Rates, thresholds and rules change; confirm the position for your situation with an accountant or on GOV.UK.