Should prices include tax? VAT, GST and sales tax

Should prices include tax? For trade businesses showing prices to homeowners, the answer depends on where you work. In some countries homeowners expect the full price, tax included; in others tax is added at the end. Either way, the customer should never be caught out: a homeowner who sees a price on your website and then gets a quote for the same price plus tax feels misled, even though you’ve done nothing wrong.

This is general information, not tax advice. Check with your tax authority or an accountant about your own situation.

What the tax is called where you work

VAT in the UK, Ireland and the rest of Europe.
GST in Australia and New Zealand.
GST, HST or PST in Canada, depending on the province.
Sales tax in the US, set by each state. Many states don’t tax most home services, so check your own state’s rules.

First: do you charge tax at all?

Most countries have a turnover threshold: below it you don’t have to register, and above it you must. Some businesses register voluntarily below the threshold. Thresholds change, so check your tax authority’s current figure.

If you’re not registered, you don’t charge tax. Your price is your price.
If you are registered, you add tax to most of your work, at the rate that applies to it.

Showing prices to homeowners

Homeowners can’t claim tax back, so the number that matters to them is the total they’ll pay.

Where prices normally include tax (the UK, Europe, Australia and New Zealand):

show prices including tax on your website, in estimates and in quotes to homeowners;
say so clearly, such as “$780 including tax”;
if you show a breakdown, show the tax as a separate line and the total at the bottom.

In the UK:

Consumer protection rules expect the prices you show consumers to be the full price they’ll pay, including VAT and unavoidable charges.

Where tax is normally added at the end (the US and Canada):

show your price before tax, as customers expect;
say clearly that tax will be added, such as “plus tax where it applies”;
show the tax and the total on every quote.

Showing prices to businesses

Business customers who are registered can usually reclaim tax, so everywhere they think in prices before tax. For commercial work, a price “plus tax” is normal and expected. Just make it clear which you mean.

If you’re not registered

You don’t need to mention tax at all, but some trades find it helps to say “No tax to add”, especially when competing with larger firms that charge it. It can make your price look more competitive, because it is.

Keep it consistent everywhere

The most common problem isn’t getting tax wrong. It’s being inconsistent: one price on the website, another on the phone, a third on the quote. Pick one way of showing prices to homeowners and use it everywhere: website, social media, estimates, quotes and invoices.

RoughFigure lets you choose whether estimates show tax included or added, and labels it clearly for customers, so the range on your website matches the quote you send. You can also work out a price with or without tax using our free pricing calculator.

Quick checklist

Do your website prices say whether tax is included?
Do homeowners know the full price they’ll pay?
Do your quotes show tax as a separate line, with a total? (How to write a quote)
Is your tax registration number on your quotes and invoices, if you have one?
Are your prices the same everywhere? (How to give a ballpark price)

Questions

Do I have to show prices including tax?

In the UK, Europe, Australia and New Zealand, prices shown to consumers should be the total they’ll pay, which includes tax if you charge it. In the US and Canada, prices before sales tax are normal, as long as you say tax will be added. For business customers, prices before tax are normal everywhere, as long as that’s clear.

Should I register for tax voluntarily?

It depends on your customers and costs. If most customers are homeowners, registering adds tax to their bills, which can make you less competitive. Talk to an accountant.

What tax rate applies to trade work?

Most trade work for homeowners is taxed at the standard rate where you work, but some work has different rules or none at all. Check with your tax authority or an accountant for your type of work.