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

This is a freeview 'At a glance' guide.

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 single-use plastic carrier bag tax was introduced in October 2015 bringing England into line with Scotland, Wales and Northern Ireland. 

External link

HMRC Guidance: Carrier bag charges: retailers' responsibilities


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