VAT on cold drinks and soft drinks in a cafe
8 November 2026 · 4 minute read
Short answer: soft drinks, bottled water, juice and smoothies carry 20% VAT, even taken away cold. Cold coffee, tea and milk drinks don't when taken away. Anything drunk at your tables carries 20%.
| Drink | Take away | Drink in |
|---|---|---|
| Can or bottle of cola, lemonade, tonic | 20% | 20% |
| Bottled water, still or sparkling | 20% | 20% |
| Fruit juice or smoothie | 20% | 20% |
| Squash or cordial | 20% | 20% |
| Iced latte or iced coffee | 0% | 20% |
| Iced tea brewed from tea | 0% | 20% |
| Milkshake | 0% | 20% |
| Carton of milk or plain oat milk | 0% | 20% |
Why cans and water carry VAT
Most food is zero-rated, but drinks are an exception. HMRC's VAT Notice 701/14 lists the drinks that are standard-rated: soft drinks like cola, lemonade and mixers, squash and cordials, fruit and vegetable juice, smoothies, and bottled water. They carry 20% wherever they're drunk.
Why iced coffee to go doesn't
Tea, coffee, cocoa and milk are on HMRC's list of drinks that stay zero-rated. So a cold drink made from them, like an iced latte, a milkshake or iced tea brewed from tea, is zero-rated when it's taken away. Hot drinks are different: they always carry 20%.
Bottled iced teas and other ready-made drinks can be a soft drink with tea as one ingredient, which is standard-rated. Your supplier's invoice shows the rate they charge.
Drunk in means 20%
Anything drunk at your tables, inside or outside, is catering, so even a zero-rated milkshake carries 20%. Give cold drinks eat-in and takeaway options on your till, the same as food.
Meal deals
A cold sandwich (0% to take away) and a can (20%) sold together for one price is a mixed sale. Split the price fairly between them, for example in proportion to what each sells for on its own, and charge VAT on the drink's share only.
What it means for your margin
- If you're VAT registered, you reclaim the VAT on cans and water you buy, so cost them at the invoice price without VAT.
- A £1.80 can gives you £1.50 after VAT. If it cost you 60p, that's 90p profit, a 60% GP.
- An iced latte to go keeps its full price, so the same drink can make more taken away than drunk in.
Check any drink in the free GP calculator, and see the cafe VAT quick table for food. This is a plain-English summary, not tax advice: an accountant can check anything you're unsure about.