If your contract with the customer requires you to deliver the goods, the delivery charge is part of a single supply of delivered goods and takes the same VAT rate as the goods, even when it is shown as a separate line. If delivery is optional and charged extra, it is a separate service and standard rated. Recharging postage you bought from Royal Mail is almost never a disbursement, so VAT is due on the recharge even though the stamps carried no VAT.

When does a delivery charge follow the VAT rate of the goods?

HMRC’s rules are in VAT Notice 700/24, section 2, with a summary in VAT Notice 700, paragraph 8.3. The key question is whether delivery is part of the contract. If, under the contract, you must deliver the goods to a place the customer specifies, such as their own address, a friend or relative, or their own customer, you make a single supply of delivered goods. The VAT liability of the whole charge is the liability of the goods.

It does not alter the position that the delivery charge is itemised or invoiced separately. Notice 700, paragraph 8.3, says that if the goods are zero rated, the zero rating extends to the delivery or postage, and that this applies to most mail order and online transactions. If delivery is free or built into the price, VAT is simply accounted for on the full sales price at the rate for the goods (Notice 700/24, paragraph 2.2).

When is delivery a separate, standard rated service?

Notice 700/24, paragraph 2.2, treats delivery as a supply separate from the goods, and always standard rated even if the goods are not, where:

  • the contract for the goods does not require delivery, but you agree to deliver for a separate charge, for example a premium courier option offered at checkout to customers who ask for it
  • you deliver somebody else’s goods
  • goods are supplied on approval, because no supply of goods has yet taken place and the delivery lets the customer view the goods before deciding

A separate charge for packing is also standard rated within the UK. Retailers using a retail scheme should follow the notice for their scheme (727/3, 727/4 or 727/5), as the way delivery income is accounted for depends on the scheme.

Is postage exempt from VAT?

Only some of it. Notice 700/24, paragraph 1.3, says postal services provided by Royal Mail Group as the universal postal service provider are exempt if they are subject to price and regulatory control. The exemption does not extend to similar services from Royal Mail or from other carriers, so most courier and business parcel contracts carry VAT. Buying unused postage stamps does not attract VAT.

The trap is what happens when you pass that cost on. Notice 700, paragraph 8.3, says the charge Royal Mail makes to you may be exempt, but your charge to your customer is taxable even if it is exactly the same amount. Notice 700/24 adds that a delivery charge which includes the cost of stamps may mean VAT is due on the whole amount, including the stamps.

When can recharged postage be a disbursement?

A disbursement is a payment you make purely as your customer’s agent. It is left out of your VAT calculation, and you cannot reclaim any VAT on it. HMRC’s guidance on costs passed to customers, and Notice 700, paragraph 25.1.1, require all eight of these conditions:

  1. you paid the supplier as your customer’s agent
  2. your customer received, used or had the benefit of the goods or services
  3. it was your customer’s responsibility to pay, not yours
  4. your customer authorised the payment
  5. your customer knew the goods or services came from another supplier
  6. the cost is shown separately on your invoice
  7. you pass on the exact amount
  8. the cost is clearly additional to your own supplies

Postage usually fails the second condition. Notice 700 says that condition usually prevents an agent’s own travel, phone bills, postage and other costs being treated as disbursements. HMRC’s guidance gives postage on letters you send to your customers as an example of a recharge that must carry VAT. A solicitor or accountant who bills clients for postage on correspondence is therefore making a standard rated recharge.

There are narrow exceptions. Under Notice 700/24, paragraph 3.4, a supplier of printed matter may treat mail operator charges as a disbursement if it meets the general conditions, stops being responsible for the mail once the mail company accepts it, and passes any discount or rebate to clients in full and fairly between them. Paragraph 3.5 says that where an agent handles Freepost for an advertiser, the agent’s recovery of the postage cost from the advertiser is not liable to VAT, because the postage is supplied to the sender. The general rules are explained in our guide to disbursements and recharges.

What happens when goods are sent abroad?

If you send goods from Great Britain to a destination outside the UK and meet the export conditions in VAT Notice 703, the sale can be zero rated. Where delivery is part of the contract, the delivery charge shares that zero rate as part of the single supply. You must export the goods and get evidence within 3 months of the time of supply (Notice 703, paragraph 3.5).

For letter post and small packets up to 2kg, a certificate of posting (form C&E132 or P326) stamped by the Post Office is the evidence; Parcelforce exports need the bar coded label and customs declaration, plus the receipt or manifest (Notice 703, paragraph 7.6). Without evidence, standard VAT is due. Evidence rules are in our guide to zero rating exports of goods, and the Isle of Man and Channel Islands are covered in VAT on sales to the Channel Islands and Isle of Man.

A separately contracted service of carrying goods between the UK and a place outside the UK is international freight transport. Where its place of supply is the UK, it is zero rated (VAT Notice 744B, paragraph 5.3).

How does this work for an online seller?

Illustration only. A printer sells leaflets online. Printed matter such as leaflets is usually zero rated (Notice 700/24, paragraph 3.1).

  • An order for £200 of leaflets with standard delivery at £8, where the terms say the printer will deliver to the customer’s address, is a single zero rated supply of £208.
  • The same order with an optional next day courier upgrade for an extra £12, chosen by the customer, gives £208 zero rated plus a separate £12 delivery service that is standard rated. If the £12 is VAT inclusive, the VAT is £2.
  • The printer’s accountant recharges £30 of Royal Mail postage on the year end correspondence. That is a recharge of the accountant’s own cost, so VAT at the standard rate of 20% is added: £6.

Where one order mixes goods at different VAT rates with a single delivery charge, Notice 700/24 does not prescribe a method. Notice 700, paragraph 8.1.1, says any apportionment of an inclusive price between supplies at different rates must be fair and justifiable.

What mistakes come up most often?

  • Charging VAT on delivery of zero rated goods when delivery is a contractual term. This overcharges customers and inflates output tax.
  • Zero rating an optional express upgrade because the goods are zero rated. A delivery option the customer chooses separately is a standard rated service.
  • Recharging Royal Mail postage without VAT on the basis that stamps are VAT free.
  • Calling routine postage a disbursement on invoices. Labelling does not make it one; the eight conditions do.
  • Zero rating parcels to overseas addresses without keeping the certificate of posting or courier evidence for the full retention period.
  • Charging VAT on packing for an export as if it were a domestic packing service. Packing connected with moving goods out of the UK can be an ancillary transport service under Notice 744B (Notice 700/24, paragraph 4.4).

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.