How should VAT be accounted for on the English carrier bag tax?

This is a freeview 'At a glance' guide to VAT on the single-use carrier bag charge.

A 5p charge on single-use carrier bags was introduced in England from 5 October 2015, bringing the country into line with the rest of the UK. This increased to 10p on 21 May 2021. 

HMRC published details confirming how VAT should be accounted for on the "bag tax".

Where suppliers are liable to charge VAT, the amount they charge for a bag is tax inclusive of the standard rate of VAT. 

  • For a VAT registered business charging 10 pence, the taxable amount will be 8.33 pence and the VAT 1.67 pence.
    • For a VAT registered business charging 5 pence prior to 21 May 2021, the taxable amount will be 4.17 pence and the VAT 0.83 pence.
  • Non-VAT registered suppliers must still charge the same minimum amount of 10 pence.
  • Suppliers using a retail scheme should ensure that VAT is properly accounted for through their scheme

Useful guides on this topic

Carrier Bag Tax
A 5p single-use plastic carrier bag tax was introduced in England in October 2015. From 21 May 2021, it was increased to 10p and extended to all retailers, regardless of size. 

Plastic Packaging Tax (subscriber guide)
What is Plastic Packaging Tax? Who does it apply to? Are small businesses subject to Plastic Packaging Tax?

Scottish plastic bag charge (VAT)
What is the carrier bag charge? Who does it apply to? Are small businesses subject to the plastic bag tax?

External link

HMRC Guidance: Carrier bag charges: retailers' responsibilities

Revenue and Customs Brief 14 (2015): VAT - compulsory charge on single-use carrier bags in England


Squirrel ad


Are you enjoying our content? 

Thousands of accountants and advisers and their clients use rossmartin.co.uk as their primary TAX resource.

Register now to receive our FREE weekly SME Tax News update