Last updated: 14 October 2026
Do you have to charge VAT on bakery items?
Most bakery food is zero-rated, so a VAT-registered bakery charges 0% on bread, cakes, plain biscuits, scones and buns sold to take away. VAT at 20% applies to hot food, food eaten on the premises, chocolate-covered biscuits, confectionery, crisps and most drinks. The rate depends on the product and on how and where it is sold, so it’s important to code each item correctly.
VAT rates for common bakery items
| Item | Takeaway | Eaten in |
| Bread, rolls, baguettes | 0% | 20% |
| Cakes (including chocolate-covered cakes) | 0% | 20% |
| Plain or partly chocolate-coated biscuits | 0% | 20% |
| Biscuits fully covered in chocolate | 20% | 20% |
| Gingerbread men with chocolate decoration only on the face | 0% | 20% |
| Cold sandwiches | 0% | 20% |
| Hot pasties, sausage rolls and pies (sold hot) | 20% | 20% |
| Cold pasties and sausage rolls | 0% | 20% |
| Hot drinks | 20% | 20% |
| Sweets and chocolate bars | 20% | 20% |
Cakes vs biscuits
Cakes are zero-rated even when they are covered in chocolate. Biscuits are standard-rated if they are wholly or partly covered in chocolate, apart from decoration such as a chocolate drizzle or features on a face. The tribunal decision on Jaffa Cakes (classed as cakes) is the best-known example of how fine the line can be.
Hot food
Food is “hot” if it is heated to be eaten hot, or kept hot after cooking. A pasty that’s freshly baked and sold while still cooling is not hot food for VAT purposes if it wasn’t kept hot to be sold hot. If it’s kept in a heated cabinet, it is standard-rated.
Eating in
If customers eat on your premises, including seating that you provide outside, all food is standard-rated. Take-away food is zero-rated if it’s cold.
Example
A bakery’s takings in a week are £4,000 of cold takeaway food (0%), £1,200 of hot pasties (20%) and £800 of coffee (20%). Its output VAT is £2,000 × 1/6 = about £333, because the standard-rated takings already include VAT.
Do you need to register?
Even if most of your sales are zero-rated, they count towards the £90,000 VAT threshold. Bakeries that mostly sell zero-rated food can ask HMRC for exemption from registration, but registering may be worth it if you reclaim more VAT on equipment and costs than you pay.
Wholesale sales
If you sell to cafés or shops, the 0% rate applies to cold bakery food in the same way. The buyer then decides how to sell it. Keep the price lists and invoices that show each product and its VAT rate, so your wholesale sales match your return.
Practical tips
- Set up separate till buttons for hot, cold, eat-in and takeaway
- Train staff to ask “eat in or take away?”
- Check HMRC’s Notice 701/14 for food and 701/40 for catering
- Review new products before you sell them
Frequently asked questions
Are cupcakes zero-rated?
Yes, they’re cakes, if sold to take away.
Is VAT due on a birthday cake?
No, when sold to take away. Decorations made from sugar paste are part of the cake.
Are doughnuts zero-rated?
Yes, if cold and sold to take away.
What about catering for events?
Catering is standard-rated, including when you deliver it.
Related: VAT on food and drink sales and reduced VAT rates.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT on bakery products. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
