Disclosure: This article is written by Shaun McManus, founder of SmartPubTools and creator of the Restaurant Console. All operational claims reflect genuine experience at Teal Farm Pub, Washington.
Which Restaurant Food Is Subject to VAT in the UK?
Key Takeaway: Food and drink sold for consumption on the premises is standard-rated at 20% VAT. Hot food sold for takeaway is 20% VAT. Cold food sold for takeaway is zero-rated. All alcohol is 20% VAT. This matters enormously for your P&L: if you calculate GP% or food cost% using VAT-inclusive revenue, you overstate your margin by approximately 17%. Every financial calculation must use net-of-VAT revenue.
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By Shaun McManus | Last Updated: May 2026
VAT on Food — The Complete UK Rules for Restaurants
| Food/drink type | VAT rate | Notes |
|---|---|---|
| Food eaten on the premises | 20% standard rate | Applies to all eat-in food regardless of temperature |
| Hot food sold for takeaway | 20% standard rate | Includes chips, hot sandwiches, pies, pasties |
| Cold food sold for takeaway | 0% zero rated | Cold sandwiches, salads, cold drinks (non-alcoholic) |
| Alcohol (all formats) | 20% standard rate | Applies whether eat-in or takeaway |
| Hot drinks (coffee, tea) | 20% standard rate | Always standard rated in restaurants |
| Soft drinks (served in restaurant) | 20% standard rate | Standard rated when served on premises |
| Bottled water (still/sparkling) | 20% standard rate | Standard rated when sold in restaurant |
| Cakes (cold, not chocolate-covered) | 0% zero rated | Complex area — seek advice for your specific product |
The VAT GP% Trap — The Most Common Calculation Mistake in UK Restaurants
This is the single most widespread financial calculation error in independent UK restaurants. GP% must always be calculated on net-of-VAT revenue. Here is the trap:
Wrong (using gross revenue): Restaurant takes £12,000 in the till this week. Food cost was £3,600. GP% = (£12,000 − £3,600) ÷ £12,000 × 100 = 70%. Looks healthy.
Right (using net revenue): £12,000 gross ÷ 1.2 = £10,000 net revenue (approximate, assuming fully standard-rated sales). Food cost was £3,600. GP% = (£10,000 − £3,600) ÷ £10,000 × 100 = 64%. Below the 65-70% target. Action required.
The same food cost% trap applies: at £3,600 food cost, the true food cost% is 36% (above the 28-32% benchmark) — not 30% (within benchmark). The operator using gross revenue believes they are fine. The operator using net revenue knows they need to act.
See the restaurant GP% calculator guide and the food cost percentage guide for the complete formulas using net-of-VAT revenue. The restaurant profit margin guide covers the full P&L journey from gross revenue to net profit.
VAT and Mixed-Rate Revenue — How to Calculate Net Revenue
If all your sales are standard-rated at 20%, net revenue = gross revenue ÷ 1.2. But most eat-in restaurants have some zero-rated sales in the mix (e.g. a cafe that sells cold takeaway alongside hot eat-in). In this case:
Net revenue = (standard-rated gross ÷ 1.2) + (zero-rated gross)
Your POS should be able to give you this split — or your accountant can calculate it from your VAT return data. For practical weekly P&L purposes, most eat-in restaurants apply a fixed estimated ratio based on their sales mix. The Restaurant Console Report module calculates VAT automatically based on your configured VAT rate in the Business Profile module.
VAT Registration and the £90,000 Threshold
As of 2026, the UK VAT registration threshold is £90,000 in taxable turnover in a rolling 12-month period. A restaurant must register for VAT if taxable turnover (including standard-rated sales) exceeds this threshold. Note: zero-rated sales count toward the £90,000 threshold even though no VAT is charged on them.
Once VAT-registered, the impact on your P&L is significant. At £10,000/week gross revenue (fully standard-rated), your net revenue is £8,333 — you are collecting £1,667/week on behalf of HMRC. That VAT must be set aside and paid quarterly. See the restaurant cash flow guide for how to manage VAT cash flow without creating a quarterly crisis.
The Pasty Tax and Other Edge Cases
UK food VAT has some well-known edge cases. Hot food sold for takeaway is standard-rated — this includes sausage rolls, hot pies, and heated paninis. Cold sandwiches made to order and sold for takeaway are zero-rated. Chocolate-covered cakes (like Jaffa Cakes — famously judged to be cakes not biscuits) are zero-rated; chocolate biscuits are standard-rated. If you sell products near any of these boundaries, take specific VAT advice for your product mix.
Run Your Restaurant Financials From One System — £97 One-Time
The Restaurant Console Report module calculates weekly P&L with VAT correctly applied — net revenue, GP%, food cost%, labour% all calculated on the right base figure. Configure your VAT rate in the Business Profile module once and every subsequent calculation is correct automatically.
✓ Weekly Report: VAT calculated automatically, GP% on correct net revenue
✓ Business Profile: configure VAT rate once, applied everywhere
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Frequently Asked Questions
Is restaurant food subject to VAT in the UK?
Eat-in food: 20%. Hot takeaway food: 20%. Cold takeaway food: 0%. All alcohol: 20%. Hot drinks: 20%.
How does VAT affect restaurant GP% calculations?
GP% on gross revenue overstates margin by ~17%. Apparent 70% GP% on gross = actual 64% on net. Always use net-of-VAT revenue for all financial calculations.
What is the VAT registration threshold for restaurants UK 2026?
£90,000 in taxable turnover in a rolling 12-month period. Zero-rated sales count toward the threshold. An eat-in restaurant reaches it at approximately £1,731/week gross revenue.
How do I calculate net revenue from gross for my weekly P&L?
All standard-rated: net = gross ÷ 1.2. Mixed: (standard-rated gross ÷ 1.2) + zero-rated gross. The Restaurant Console Report module calculates this automatically.
Do I charge VAT on delivery platform orders?
Yes — hot food delivered is 20% VAT. The platform commission also carries VAT. On a £22.50 Deliveroo order: 30% commission + 20% VAT on that commission = 36% effective deduction, not 30%.
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