VAT on website design catches out a lot of small business owners, mainly because two similar-looking quotes can differ by 20% once VAT is added. Whether you pay VAT, and whether you get it back, depends on two things: whether your web designer is VAT-registered, and whether you are.
This guide explains how VAT on websites works in the UK, how subscriptions from overseas platforms are treated, and the basics of how website costs are handled for income tax and corporation tax. It is general information, not tax advice. For your own situation, check HMRC guidance or ask your accountant.
Does web design have VAT on it?
Web design is a standard-rated service in the UK, so a VAT-registered designer must add VAT at 20%. A business must register for VAT once its taxable turnover exceeds £90,000 in a rolling 12-month period, or is expected to within the next 30 days. Many freelancers and small studios are below that threshold, so they do not charge VAT at all.
That is why it matters whether a quote says "plus VAT", "including VAT" or nothing. A £2,000 quote plus VAT is £2,400. A £2,000 quote from a designer who is not registered is £2,000. If a quote does not say, ask.
Prices aimed at consumers are normally shown including VAT, while business-to-business quotes are often shown excluding it. Web designers sell mostly to businesses, so 'ex VAT' pricing is common. When comparing, put every quote on the same basis.
Can you reclaim VAT on a website?
For a VAT-registered business, reclaimable VAT means the real cost of a website is the price before VAT. For an unregistered business, the VAT-inclusive price is the real cost. That is worth factoring in when comparing a VAT-registered agency with an unregistered freelancer.
| Your business | Designer VAT-registered? | What you pay | Can you reclaim the VAT? |
|---|---|---|---|
| VAT-registered (standard accounting) | Yes | Price plus 20% VAT | Usually yes, with a valid VAT invoice |
| VAT-registered (standard accounting) | No | Price only | No VAT to reclaim |
| On the Flat Rate Scheme | Yes | Price plus 20% VAT | Generally no; the scheme limits reclaims on purchases |
| Not VAT-registered | Yes | Price plus 20% VAT | No; VAT is a real cost to you |
| Not VAT-registered | No | Price only | No VAT involved |
Monthly fees, hosting and subscriptions
VAT works the same way on monthly website fees, hosting, maintenance plans and domain renewals from UK suppliers: if the supplier is VAT-registered, VAT is added, and if you are VAT-registered you can usually reclaim it. Keep the invoices. A monthly direct debit with no VAT invoice behind it is not enough to support a reclaim.
If you use the VAT cash accounting scheme, you reclaim VAT on purchases when you pay the invoice rather than when you receive it, which matters for a large upfront website payment. Your accountant will know which scheme you use.
Website builders and software from overseas companies
Many website builders, hosting companies and app providers bill UK customers from companies based outside the UK. How VAT is handled depends on your status. Where the customer is not VAT-registered, the provider typically charges UK VAT on its prices. Where the customer is a VAT-registered business, the reverse charge may apply: the supplier does not charge VAT, and you account for it yourself on your VAT return, which usually nets to zero if you can fully recover VAT.
Most platforms ask for your VAT number at checkout or in account settings for this reason. If you are VAT-registered and have been charged VAT by an overseas provider without giving your VAT number, it is worth checking the settings and asking your accountant how to treat it.
Is a website tax deductible?
Website costs are generally allowable business expenses, but how they are treated depends on what the cost is and how your business is set up. HMRC's internal guidance on business income includes specific material on website costs. In broad terms:
- Running costs such as hosting, maintenance, domain renewals and monthly website fees are generally treated as day-to-day expenses and deducted in the year they are incurred.
- The cost of building a new website may be treated as capital expenditure if it creates a lasting asset for the business. Depending on your structure and accounting, it may then be claimed through capital allowances or amortised over time rather than deducted all at once.
- Limited companies generally follow their accounting treatment for intangible assets, which your accountant will set.
- Costs that are really advertising, such as content that goes out of date quickly, may be treated as revenue expenses.
- Sole traders using the cash basis have different, generally simpler rules for many purchases, though not all. Ask your accountant how a website build is treated in your case.
Questions to ask your web designer about VAT
- Are you VAT-registered? If so, what is your VAT number?
- Are your prices shown including or excluding VAT?
- Will you issue a proper VAT invoice for the build and for monthly fees?
- Are any third-party costs you pass on, such as domains or apps, billed with VAT?
- If you are on a monthly plan, will each monthly invoice show VAT separately?
- If you are not VAT-registered now, will you tell me if that changes during our contract?
A worked example
Say you are choosing between two quotes for the same site: an agency at £3,000 plus VAT and a freelancer at £3,000 who is not VAT-registered.
If your business is VAT-registered and can reclaim in full, the agency costs you £3,600 upfront but you recover £600 on your next return, so both cost £3,000. If your business is not VAT-registered, the agency costs £3,600 and the freelancer £3,000, a real difference of £600 before you compare anything else.
The same logic applies to monthly fees. A £60 monthly fee plus VAT is £72 a month for a business that cannot reclaim it, which is £432 more over three years.
How VAT applies to our prices
Nerdsharks is not VAT registered, so there is no VAT to add to our prices: £299 setup and £99 a month on Monthly, or £1,795 and £49 a month on Own It, is what you pay. The flip side is that a VAT-registered business has no VAT to reclaim from us, so compare our prices with a VAT-registered agency's prices before VAT, and with an unregistered freelancer's prices as they stand.