Last updated: 14 October 2026
Do you need to change your invoices when the VAT rate falls?
Yes. When a VAT rate changes, you must charge the new rate on supplies with a tax point on or after the change date. Update your invoice templates, till systems and price lists from that date, and show the correct rate and VAT amount on each invoice. For supplies that straddle the change, there are special rules that let you apportion VAT or use the tax point to decide which rate applies.
What to update
- Invoice templates and accounting software VAT codes
- Point-of-sale systems and price labels
- Website prices and online shop settings
- Quotes and contracts that state VAT-inclusive prices
- Recurring invoices and direct debit amounts
Which rate applies?
The rate depends on the tax point, which is usually the earlier of the date of supply and the date you receive payment or issue an invoice (if issued within 14 days of supply).
| Situation | Rate |
| Goods supplied and invoiced after the change | New rate |
| Payment received before the change for supplies made after it | Old rate, unless you choose to apply the new one under the change rules |
| Continuous supplies, such as a service contract spanning the change | You can apportion between old and new rates |
| Invoice issued before the change for goods supplied later | The invoice sets the tax point, so the old rate usually applies |
Lowering prices for customers
If the rate falls, you don’t have to reduce your VAT-inclusive prices. You can keep them the same and keep the extra margin, provided the VAT shown is correct. For business-to-business sales, VAT-registered customers will reclaim whatever VAT you charge, so the change mainly affects consumers.
Credit notes after a rate change
If you issue a credit note for an original supply, use the VAT rate that applied to that supply. Don’t use the new rate just because the credit note is issued after the change.
Example
In the 2020/21 period of temporary rate cuts, the VAT rate on hospitality fell from 20% to 5% on 15 July 2020. A restaurant that had invoiced a wedding party in June for an event in August had to decide the tax point. The June invoice fixed the tax point, so 20% applied, unless the business issued a credit note and re-invoiced under the new rate. Similar issues arise whenever rates change.
Practical checklist
- Note the change date and the products affected
2. Update software VAT codes the night before
3. Review open quotes and contracts
4. Communicate price changes to customers if needed
5. Check your first VAT return after the change carefully
Flat rate scheme users
If you use the flat rate scheme, HMRC may also change the flat rate percentages for affected sectors. Apply the new flat rate from the change date.
Frequently asked questions
Do I have to reissue old invoices?
No, invoices issued before the change remain correct at the old rate.
What if I charge the wrong rate?
Issue a credit note and a new invoice at the correct rate.
Can I keep my prices the same?
Yes, if the VAT shown is correct.
Does a rate change affect my VAT scheme?
It can affect flat rate percentages.
Related: credit notes and VAT and when to record payments for VAT.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT rate changes and invoicing. 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.
