Pricing your menu with VAT: a guide to HMRC Notice 709/1

18 October 2026 · 2 min read

VAT on food is one of the trickiest bits of pricing for small food businesses, because the same sandwich can be zero rated or standard rated depending on how you sell it. HMRC's guidance is VAT Notice 709/1: catering and takeaway food. Here is a plain-English starting point.

Do you need to charge VAT at all?

Only VAT-registered businesses charge VAT. You must register if your taxable turnover over the last 12 months goes over £90,000, or you expect it to go over that in the next 30 days. You can also register voluntarily. See GOV.UK: when to register for VAT.

If you are not registered, you do not add VAT, and your whole menu price is yours.

The rates you will meet

GOV.UK lists the current VAT rates: standard 20%, reduced 5% and zero 0%. For catering and takeaway food, Notice 709/1 sets out which applies. In broad terms:

• Catering, including food eaten on your premises, is standard rated (20%).
• Hot takeaway food is standard rated.
• Cold takeaway food is often zero rated, but there are important exceptions. Notice 709/1 lists items such as confectionery, crisps and many drinks as standard rated even when cold and taken away.

Whether food counts as "hot", and what counts as eating on your premises, have specific meanings in the notice, so it is worth reading the relevant sections for your menu. If you are unsure, ask HMRC or an accountant.

Working back from a menu price

UK menus show prices including VAT. To see what you actually keep, take the VAT out:

• 20% VAT: price ÷ 1.2
• 5% VAT: price ÷ 1.05
• 0%: the full price

So a £5.50 eat-in bacon butty at 20% VAT is £4.58 before VAT. The other 92p goes to HMRC.

Setting a price that hits your margin

1. Cost one portion properly, including waste and packaging. Our food cost % guide walks through it.
2. Pick your target margin, say 70%.
3. Price before VAT = cost ÷ (1 minus margin). A £1.39 cost at 70% gives £4.63.
4. Add VAT at the rate that applies: £4.63 × 1.2 = £5.56.
5. Round to a menu-friendly price, then check the margin again.

Eat-in and takeaway at different prices?

Some businesses charge the same price whether customers eat in or take away, and some charge differently. Either way, the VAT due depends on what was actually sold, so your till needs to record it correctly. Notice 709/1 has the detail.

Let the calculator do the sums

The free Dish Profit Calculator lets you choose 20%, 5% or 0% for each dish and shows your margin after VAT, plus suggested prices at 60% to 75% margin. Your first costing each visit is free; saving and PDF sharing come with Chef Plan.

This is general guidance, not tax advice. Always check HMRC Notice 709/1 or speak to an accountant for your situation.

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