What tax codes do you need to use in your Sage 50 Accounts software? If you are registered for VAT you will need to charge VAT when you make taxable sales. The rate of VAT varies between different goods and services and not all transactions are applicable for VAT. Therefore, it’s important to check that you are charging the right amount of VAT for each type of transaction. Not sure which rate applies? See HMRC’s full list of VAT notices for more information.

Using Tax Codes in Sage 50 Accounts

As well as collecting the right amount of VAT with each transaction, the item also needs to be entered into your accounting software with the right VAT Code to reconcile the transaction correctly.

Like many other accounting software packages, Sage 50 Accounts is pre-built with a range of default VAT codes, here are some of the most common ones you’ll need in 2023.

Import Tax Codes Post-Brexit

Following the UK’s exit from the European Union new tax codes were created for use after 1^st January 2021. The new tax codes allow you to record imports from both EU and non-EU countries following Brexit.

• T14 – Import of goods – No VAT
• T15 – Purchase of services from ROW – Reverse charge
• T16 – Purchase of services from ROW – No VAT
• T17 – Import of goods – Under import reverse charge threshold
• T18 – Import of goods – Postponed VAT
• T19 – Import of goods – VAT no postponed

Here is a useful article from Sage to help you use the import tax codes within your 50cloud Accounts software.

2023 VAT Tax Code for Zero-rated Goods and Services 0% – T0

This code is for use with any goods and services that are zero-rated for VAT purposes. This includes

• Most food items
• Children’s clothing
• Books and newspapers
• The construction of new housing
• Passenger transport
• Prescription medicines

2023 VAT Tax code for Standard Rated Goods and Services, 20% – T1

One of the most commonly used tax codes across all industries is the ‘T1’ code used for any goods or services taxed at the standard VAT rate of 20%. This usually includes

• Alcoholic drinks
• Catering services
• Confectionary
• Crisps/ savoury snacks
• Hot food
• Ice cream
• Sports drinks
• Soft drinks/ mineral water
• eBay seller fees

2023 Tax code for Exempt Goods and Services, 0% – T2

There are many transactions that are exempt from VAT charges and require a 0% code. The code for VAT exempt items is ‘T2’ and this is most commonly used for the goods and services below.

• Exempt land and building sales
• Some finance charges
• Education and some training
• Health services
• Betting and gaming transactions
• Burials and cremation
• Postal services
• Insurance services

2023 VAT Tax Code for Reduced Rate Goods and Services, 5% – T5

Some transactions are eligible for a discounted VAT rate of 5% and require the use of the ‘T5’ tax code. These transactions include

• Mobility aids for elderly people
• Smoking cessation products such as nicotine patches and gum
• Insulation
• Radiators
• Electricity – charity, domestic and residential
• Gas – charity, domestic and residential

2023 Tax Code for Non-Vatable Items – T9

There are certain transactions that aren’t liable for VAT and will require the code T9 in your Sage 50 Accounts software. These non-vatable items are

• Wage payments
• Bank or cash transfers
• PAYE and National Insurance contributions
• Capital
• Loans, dividends and gifts of money

2023 VAT Tax Code for Reverse Charge Items – T20

If you are adding entries for VAT Reverse Charge, you’ll need to use the code ‘T20’. These items typically include

• Wholesale supplies of telecommunications services
• Mobile phones in certain circumstances
• Computer chips in certain circumstances
• Emissions allowances

The information in this article is intended as a general guide to VAT Tax codes within Sage 50 Accounts software only and is not a comprehensive list of all types of transactions. We advise you to seek professional advice if you are unsure of the appropriate tax codes for your business either by speaking to a qualified accountant or HMRC directly.

Need help getting to grips with your Sage 50 Accounts software? We offer a range of Sage training courses designed to suit all learning styles, budgets, and abilities.