What does the pledge mean? 

Value Added Tax (VAT) is paid on most products and services sold by VAT-registered businesses. Businesses with a total taxable turnover of more than £90,000 must register for VAT.

Most goods and services are taxed at the standard VAT rate of 20%. There is also a reduced rate of VAT (5%) that applies to some specific goods and services, and a ‘zero rate’, where no VAT is charged, that applies to things like children’s clothes and most food items.

Labour’s manifesto stated that the party, if elected, would not increase VAT. The manifesto did not specify whether this referred to the rates of VAT or the threshold at which businesses must register for VAT, or both.

HMRC collects VAT from businesses, but it is charged to consumers when they purchase goods or services—as Labour appears to acknowledge in its manifesto, which lists VAT as a tax on “working people”.

The pledge seems to commit the government to not increasing VAT throughout the parliament, so we won’t be able to say whether it’s met this commitment in full until the next election.

It’s also worth noting that the pledge appears to be part of a wider commitment to not increase taxes on “working people”, a term which isn’t explained in the manifesto and which Labour politicians have subsequently struggled to consistently define. This caveat has caused significant confusion with regards to Labour’s pledge not to increase National Insurance.

When we asked the Treasury for its definition of “working people” in November 2024, it told us this referred to not increasing taxes in people’s payslips.

It’s worth noting that Labour’s manifesto, in a separate pledge, also sets out specific plans to end the VAT exemption for private schools.

What progress has been made?

This pledge appears to be on track currently. Labour has presented one Budget since it came into government, which did not introduce any changes to VAT (aside from the changes affecting private schools).