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Information on VAT and postal services

Changes to VAT rules and the way in which our products are regulated have affected the VAT status of a number of our products. A limited range of our products became subject to VAT through 2011, and this has been extended to other business products from 2 April 2012. A summary of the main products affected is shown later on this page.

Universal services (USO) such as 1st and 2nd Class stamps will continue to be VAT exempt. A list of products that will remain VAT exempt is also shown later on this page.

For more information on Royal Mail prices for 2012 visit: www.royalmail.com/prices2012

Further Information

Many business customers can reclaim VAT. If your business is registered for VAT, and sells taxable goods or services, then as a general rule, you will be able to recover the VAT in the normal way on your VAT return. For professional advice, talk to your Finance department, accountant or tax advisor. You can also find more information on VAT at the HMRC website: www.hmrc.gov.uk/vat (new window).

Summary

Royal Mail products that are liable to VAT:

Packet Despatch

• Special Delivery™ 9.00am (stamps, franking and account)
• Special Delivery™ Next Day (account)
• Royal Mail Tracked® and Tracked™ Next Day
• Royal Mail Sameday®
• Packets (including Standard Account packets, Packetpost, Packetsort and Packetsort Plus)
• Packetpost Returns
• Recorded Signed For™ will also become liable to VAT if purchased as an add-on to a standard rated service. In all other circumstances it will remain VAT exempt.

Marketing Services

• Advertising Mail™ (formerly Advertising Mail 70,120, and 1400, including Big Book and Heavyweight options)
• Sustainable® Advertising Mail (formerly Sustainable Mail)
• Advertising Mail™ with Response (formerly mailmedia®)
• Door to Door™

Publishing

• Publishing Mail (formerly Pressstream®)
General Correspondence • Business Mail 1st Class (formerly Standard Account letters and large letters, Automated Standard Tariff Large Letter (ASTLL), Cleanmail®, Cleanmail® Plus and Cleanmail® Advance, Mailsort® 70, 120, 700 and 1400, and Walksort®)
• Business Mail (formerly Standard Account letters and large letters, Automated Standard Tariff Large Letter (ASTLL), Cleanmail®, Cleanmail® Plus and Cleanmail® Advance, Mailsort® 70, 120, 700 and 1400, and Walksort®)

Response Services

• Response Services License fees
• Special Delivery™ with Response
• Business Reply Plus and Freepost Plus
• Business Reply Standard, Freepost Standard and Freepost NAME

International (VAT will only be added to EU destinations)

• International Contract Tracked and Secure Services (Contract Airsure® and Contract Signed For)
• International Contract Services (Mixed Mail, Letters, Flats, Packets, Destination Sort and Mbags)
• Airsure®
• International Admail and Admail Packets
• International Redirections

Outbound Mail

• Collections

Inbound Mail

• PO Box®
• Timed Delivery™
• Early Collect
• Early Extraction™
• Pre-sorted Delivery
• Selectapost
• Local Collect®
• Diversion

Other Products

• Business Mail Secure
• Admail
• Callers Services
• Posting Cheque administration charge
• Private Posting Box
• Royal Mail administration fee for collection of HMRC charges
• Royal Mail Pouch Services
• Rural Newspaper Delivery
• Rural Carriage of Goods
• Redirect Diversion
• Ministerial Pouch services
• Do not redirect
• Safebox

Contract Products

• Mailroom Management
• Mailroom Consulting Services
• Royal Mail Relay®
 

Royal Mail products that remain exempt from VAT, in addition to free products

UK

• 1st and 2nd Class (stamps, online, franking, account)
• Special Delivery™ Next Day (stamps and franking)
• Standard Parcels
• Recorded Signed For™ (if purchased with a VAT exempt service)
• Keepsafe™ (personal and business)

International

• Airmail
• Surface Mail
• International Signed For
• All HM Forces Mail (BFPO)

Inbound Mail

• Redirections within UK (personal and business)

Frequently Asked Questions

1. Why is VAT now being charged on some postal products?
2. Why did more products become liable to VAT from 2nd April 2012?
3. Is VAT payable on stamps?
4. Which products are subject to VAT?
5. Which products are not subject to VAT?
6. What prices are changing in April 2012?
7. Is VAT payable on stamps?
8. What is happening to franking machines?
9. Does Royal Mail issue VAT invoices?
10. Can I reclaim the VAT I pay on postal products?
11. Can I use Online Postage to purchase products liable to VAT?

1. Why is VAT now being charged on some postal products?

For many years, postal products have been exempt from VAT.
A court case has led to a change in the rules about VAT on postal products throughout the European Union. By law, from 31st January 2011, we had to start charging VAT at the Standard Rate (20% for UK customers) on some postal products within the European Union (EU), including within the UK..
The change only affects some Royal Mail products. Some of our products are part of the Universal Service Obligation (USO) or are subject to price control by our Regulator, and it has been agreed with HMRC that such products are not subject to VAT. However any products which are not part of the USO, or not price controlled are now liable to VAT at the standard rate.

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2. Why did more products become liable to VAT from 2nd April 2012?

HMRC guidelines show that generally Royal Mail products that are not part of the Universal Service Obligation (USO) or price control will become liable to VAT. Our Regulator issued a new USO on 1st August and price control from 2nd April 2012 which identified more Royal Mail products moving out of these areas.

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3. Is VAT payable on stamps?

You won't pay VAT when you buy stamps and most products you post using stamps won't be affected by VAT.

 

 
For example, there's no VAT to pay when you use stamps on 1st and 2nd Class mail, our Special Delivery™ Next Day without additional enhancements, Recorded Signed For™, International Airmail and Surface Mail, International Signed For and Standard Parcels.
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4. Which products are subject to VAT?
The following products are liable to VAT:
Royal Mail products that are liable to VAT:
Packet Despatch
• Special Delivery™ 9.00am (stamps, franking and account)
• Special Delivery™ Next Day (account)
• Royal Mail Tracked® and Tracked™ Next Day
• Royal Mail Sameday®
• Packets (including Standard Account packets, Packetpost, Packetsort and Packetsort Plus)
• Packetpost Returns
• Recorded Signed For™ will also become liable to VAT if purchased as an add-on to a standard rated service. In all other circumstances it will remain VAT exempt.
Marketing Services
• Advertising Mail™ (formerly Advertising Mail 70,120, and 1400, including Big Book and Heavyweight options)
• Sustainable® Advertising Mail (formerly Sustainable Mail)
• Advertising Mail™ with Response (formerly mailmedia®)
• Door to Door™
Publishing
• Publishing Mail (formerly Pressstream®)
General Correspondence
• Business Mail 1st Class (formerly Standard Account letters and large letters, Automated Standard Tariff Large Letter (ASTLL), Cleanmail®, Cleanmail® Plus and Cleanmail® Advance, Mailsort® 70, 120, 700 and 1400, and Walksort®)
• Business Mail (formerly Standard Account letters and large letters, Automated Standard Tariff Large Letter (ASTLL), Cleanmail®, Cleanmail® Plus and Cleanmail® Advance, Mailsort® 70, 120, 700 and 1400, and Walksort®)
Response Services
• Response Services License fees
• Special Delivery™ with Response
• Business Reply Plus and Freepost Plus
• Business Reply Standard, Freepost Standard and Freepost NAME
International (VAT will only be added to EU destinations)
• International Contract Tracked and Secure Services (Contract Airsure® and Contract Signed For)
• International Contract Services (Mixed Mail, Letters, Flats, Packets, Destination Sort and Mbags)
• Airsure®
• International Admail and Admail Packets
• International Redirections
Outbound Mail
• Collections
Inbound Mail
• PO Box®
• Timed Delivery™
• Early Collect
• Early Extraction™
• Pre-sorted Delivery
• Selectapost
• Local Collect®
• Diversion
Other Products
• Business Mail Secure
• Admail
• Callers Services
• Posting Cheque administration charge
• Private Posting Box
• Royal Mail administration fee for collection of HMRC charges
• Royal Mail Pouch Services
• Rural Newspaper Delivery
• Rural Carriage of Goods
• Redirect Diversion
• Ministerial Pouch services
• Do not redirect
• Safebox
Contract Products
• Mailroom Management
• Mailroom Consulting Services
• Royal Mail Relay®
We also have to charge VAT on products provided under individually negotiated business contracts with customers. This does not include standard discounts which are available to all qualifying customers.
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5. Which products are not subject to VAT?
The following products remain exempt from VAT, in addition to free products.
UK
• 1st and 2nd Class (stamps, online, franking, account)
• Special Delivery™ Next Day (stamps and franking)
• Standard Parcels
• Recorded Signed For™ (if purchased with a VAT exempt service)
• Keepsafe™ (personal and business)
International
• Airmail
• Surface Mail
• International Signed For
• All HM Forces Mail (BFPO)
Inbound Mail
• Redirections within UK (personal and business)
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6. What prices are changing in April 2012?
Royal Mail changed its prices on 2nd April 2012 and some further price changes will take effect on 30th April 2012. For more information, please visit: royalmail.com/prices2012
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7. Is VAT payable on stamps?
You won't pay VAT when you buy stamps and most products you post using stamps won't be affected by VAT.
For example, there's no VAT to pay when you use stamps on 1st and 2nd Class mail, our Special Delivery™ Next Day without additional enhancements, Recorded Signed For™, International Airmail and Surface Mail, International Signed For and Standard Parcels.
^ Back to top 8. What is happening to franking machines?
If you have a "smart" franking machine which can handle VAT, you’ll be fine. Speak to your franking supplier to find out more.
You can also still use any franking machine to buy all the Royal Mail products which aren't affected by VAT, like 1st and 2nd Class, Special Delivery™ Next Day, International Airmail and International Signed For™.
You will need a "smart" franking machine which can handle VAT if you want to buy any of the products affected by VAT. The well-known products affected which are available on franking machines are Special Delivery™ 9.00am, Business Mail (formerly Cleanmail®), Airsure®, and Single Business Collections.
For more information about franking, visit: www.royalmail.com/franking
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9. Does Royal Mail issue VAT invoices?
The invoices we issue to business customers, for example for purchases on account, using our Online Business Account (OBA) or Posting Cheques, will be VAT invoices which show the amount of VAT.
If you are posting at a Post Office® branch, the receipt you receive will be a VAT receipt.
You will receive a VAT invoice for taxable products franked on a Smart franking machine.
Our Mail Centre counters and Delivery Offices will not issue VAT receipts.
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10. Can I reclaim the VAT I pay on postal products?
Many business customers can reclaim VAT, but we do appreciate that some cannot.
If your business is registered for VAT, and sells taxable goods or services, then as a general rule, you will be able to recover the VAT in the normal way on your VAT return.
You should keep your VAT invoice or receipt as evidence.
Business customers who are not VAT registered or do not sell taxable goods or services can't reclaim the VAT on their business purchases and expenses.
For professional advice, talk to your Finance department, Accountant or Tax Advisor. You can also find more information on VAT at the HMRC website: www.hmrc.gov.uk/vat (new window).
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11. Can I use Online Postage to purchase products liable to VAT?
You will not be able to buy affected products on SmartStamp® and Online Postage for a while. They will still be available at Post Office® branches and on account.
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