If you run a café, restaurant, or takeaway in the UK, understanding VAT on foods can feel like trying to find your way around a maze. One item is zero-rated, the next is standard-rates, and the rules seem to hinge on subtle differences like temperature, packaging, or where the food is eaten.

This guide will strip away the jargon and explain everything you need to know about VAT on food in clear, practical terms. 

Whether you’re pricing a menu, registering for VAT, or dealing with your accountant, this is the resource you need to get it right. 

VAT rates on food and drink in the UK

In the UK, food and drink are subject to one of the following VAT rates, depending on the type of product and how it’s sold:

These rules might sound simple at first, but there are plenty of nuances—particularly around takeaway food and drinks. 
‍

Eating in: always standard-rated

If a customer consumes food or drink on your premises, you must charge VAT at the standard rate of 20%. Regardless of whether the item is hot or cold. 

This includes:

• Food and drink consumed at tables, counters, or any seating area you provide. 
• Meals eaten in restaurants, cafés, pubs, or food courts. 
• Cold items like bottled water or sandwiches if they are eaten on-site.

It doesn’t matter what type of food it is, the key point is where it’s eaten.

{{ltd-guide}}

Takeaway: the hot vs cold distinction 

VAT treatment becomes more complicated when food is sold to be taken away. 

Cold takeaway food

Most cold takeaway food is zero-rated for VAT, but only if it’s not an “excepted item” such as confectionery, crisps, or sweetened baked goods. 

Examples of usually zero-rated cold items include:

• Cold sandwiches
• Salads
• Cakes and plain pastries (not sweetened or iced)
• Cold wraps, plain sausage rolls, and sushi
• Basic snacks like fresh fruit, nuts, and some cereal bars

Be cautious with items like pastries and sausage rolls—if they’re sweetened, iced, or chocolate-covered, they may count as confectionery and be standard-rated. Check HMRC’s exceptions list if unsure.
‍

Hot takeaway food

If food is hot at the point of sale, it is generally subject to 20% VAT. HMRC considers a food hot if it meets certain criteria. Including if:

1. It has been heated for the purposes of enabling it to be consumed hot.
2. It has been heated to order.
3. It is kept hot after being cooked or heated.
4. It is supplied in packaging specifically designed to retain heat. 
5. It is advertised or marketed as hot. 

So, as an example, things like fish and chips, toasted sandwiches and hot soup must be charged at 20% VAT. 
‍

Bakery items: the ‘pasty’ test

Most bakery items like bread, cakes and plain biscuits are zero-rated for VAT when sold cold. But things change when those items are sold hot.

If something is simply warm because it’s just come out of the oven and you’re not doing anything to keep it hot, it’s usually still zero-rated. However, if you actively keep it warm, sell it in heat-retaining packaging, or market it as a hot snack, then it becomes standard-rated and VAT must be charged.

This became a big issue during the so-called "pasty tax" debate in 2012, when the government tried to make the rules around hot takeaway food clearer. The result was a focus on intention: it’s not just about whether the food is hot, but whether it’s being sold as hot food.

So if you’re selling sausage rolls or pasties and you’re keeping them hot for customers to eat straight away, you’ll need to add VAT. If they’re cooling naturally and not marketed as hot, they’re likely to remain zero-rated. It’s a small detail, but one that matters.
‍

Drinks: does temperature matter?

Most drinks are subject to the standard-rated VAT. However, there are a few exceptions, including milk as a basic grocery item. 

Are hot drinks subject to VAT?

Hot drinks like tea, coffee, and hot chocolate are always standard-rates, whether they’re consumed on the premises or taken away. 

Alcohol and soft drinks

Most cold drinks are standard-rated, including bottled water, fizzy drinks, smoothies, and milkshakes. However, plain milk (and sometimes flavoured milk) is zero-rated if sold as a basic grocery, not part of catering.

All alcoholic beverages are subject to standard-rate VAT, regardless of temperature or context.
‍

Catering and event services

If your business provides food and drinks as part of a catering service (e.g. corporate events, private functions or weddings), the entire supply is treated as a service and therefore standard-rated at 20%. 

This applies even if the foot itself would otherwise be zero-rated. The act of preparing, presenting, or serving it as part of a catering service means it’ll be charged at standard rate regardless. 

This also includes:

• Staff meals provided by employers through catering companies
• Food served on transport (planes, trains, etc.)
• Food in hotels, including breakfast and room service, is treated as catering and charged at the standard 20% VAT rate.
  ‍

Food and drink as business expenses

If you're self-employed or run a Limited Company, you may be able to reclaim VAT on food and drink as an expense, but only in specific circumstances. If you're not VAT registered and wondering if you can still claim VAT back, we'd recommend checking out this article.

We recommend:

• Claiming food and drink as subsistence when you're travelling for business or working away from your usual base.
• The expense must be wholly and exclusively for business purposes.
• You need a valid VAT receipt — not just a card payment slip.
• Alcohol is not normally reclaimable, even if consumed at a business event.

VAT on client entertaining, such as taking someone for lunch, is also not reclaimable. However, VAT on staff subsistence and travel meals may be.
‍

Summary of VAT on good by scenario

Making sense of VAT on food

Getting VAT right on food and drink isn’t just about ticking boxes. It affects your pricing, your profit margins, and how confident your customers feel when they buy from you. The differences between hot and cold, eat-in or takeaway, or whether something counts as catering might seem small, but they can make a real impact on your VAT bill.

If you’re unsure where your business stands, it’s worth speaking to someone who understands how the hospitality world works. At Crunch, we support Sole Traders, Limited Companies, and small food businesses across the UK with clear, practical VAT advice and accounting that fits around you.

Whether you need help registering for VAT, figuring out what you can claim, or just want someone to take the hassle off your hands, we’re here to make things simpler. No jargon. No stress. Just expert support when you need it.

‍