From Laura Porter,
Your Guide to London Travel.
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Definition:

VAT is the tax payable on all goods and services in the UK, currently rated as 17.5%.

On shop-bought goods the tax is included so you do not need to add it to the price displayed. If a bottle of water is priced at 70p then 70p is what you will pay the shopkeeper.

For larger, more expensive purchases you may see the breakdown of goods/service price, then the VAT price, then the total payable.

Also Known As: Value Added Tax

Alternate Spellings: V.A.T.