VAT on Franking Machine Postage: What UK Businesses Need to Know

Most Royal Mail postage bought through a franking machine is exempt from VAT, so there is no VAT to add or reclaim on standard 1st and 2nd Class franked mail. VAT at 20% does apply, however, to the things around your postage: the franking machine itself, ink cartridges, labels, maintenance and certain premium or business services. This guide explains exactly what is taxed, what is not, and how VAT-registered businesses can reclaim the VAT they are entitled to.

Is franking machine postage subject to VAT?

No. Standard letter postage sent through a franking machine falls under Royal Mail's Universal Service Obligation (USO), and USO services are exempt from VAT. That means your everyday 1st and 2nd Class franked mail carries no VAT at all, whether you pay by stamp, online, account or franking machine. Royal Mail sets this out clearly in its official guidance on VAT and postal services, which lists the products that remain exempt.

Because these services are exempt rather than zero-rated, there is no VAT element hidden inside the price. You are not paying VAT and then reclaiming it - the postage simply sits outside the VAT system. The same principle applies to Special Delivery Guaranteed by 1pm and International Standard and Economy mail when bought through your machine.

What franking costs do carry VAT?

While the postage is exempt, almost everything else connected to running a franking machine is standard-rated at 20%. If your business is VAT registered, that is good news, because it usually means you can recover the VAT. The costs that normally attract VAT include:

• Renting or buying the franking machine itself
• Franking machine ink and cartridges
• Franking labels and other consumables
• Maintenance, service contracts and repairs
• Royal Mail licence fees and tariff (rate) updates

So while the mail you send is VAT free, the ink you print it with is not. It is worth keeping this distinction clear when you reconcile your accounts, because postage and supplies are treated completely differently on your VAT return. If you are unsure which cartridge or label your model needs, our guide to choosing franking labels walks through the options by machine.

Which Royal Mail services are standard-rated?

Not every Royal Mail service is exempt. A number of business and premium products became liable to VAT when the rules and regulation of postal services changed, and these are standard-rated at 20% even when franked. Common examples include:

• Business Mail (1st Class and standard) where volume discounts apply
• Advertising Mail and Sustainable Advertising Mail
• Royal Mail Tracked 24 and Tracked 48
• Special Delivery Guaranteed by 9am and Royal Mail Sameday
• 1st and 2nd Class Account Mail
• Royal Mail Signed For, but only when added to a service that is already standard-rated

The key thing to remember is that ordinary franked 1st and 2nd Class letters stay exempt, while these higher-tier or contract services carry VAT. If you regularly mix service types, it pays to track them separately so your VAT figures are accurate. For a plain-English breakdown of how the franked rates themselves compare, see our article on franking machines versus stamps.

How VAT-registered businesses reclaim franking VAT

If your business is registered for VAT and makes taxable supplies, you can generally recover the VAT you pay on your franking machine, ink, labels, servicing and any standard-rated Royal Mail services in the normal way on your VAT return. Postage that is exempt has no VAT to reclaim, so it simply does not appear as input tax.

Modern SMART franking meters make this far easier. Because the machine records the type of service used for every item, it can transfer that data back to Royal Mail and generate a VAT statement automatically. That statement separates your exempt postage from your standard-rated services, giving you the evidence HMRC expects when you reclaim. Keep these statements alongside your supplier invoices for ink, labels and rental so your records are complete. For general rules, HMRC's VAT guidance on GOV.UK is the authoritative reference, and your accountant can confirm how it applies to your business.

Does the Mailmark franking discount affect VAT?

No. The discount you get for franking, and the extra saving for Mailmark franking, applies to the postage price, which is already exempt from VAT. As of the April 2026 rates, a 1st Class letter costs £1.80 as a stamp but £1.77 when franked with Mailmark, and a 2nd Class letter costs 91p as a stamp against 88p franked, a 3p saving per item either way. That discount lowers the exempt postage cost; it does not create or remove any VAT. If you want to understand the technology behind it, our explainer on Mailmark franking machines covers what changed and why it matters, and the current figures are confirmed in our 2026 postage rates update.

Quick reference summary

In short: franked 1st and 2nd Class postage is VAT exempt, so there is nothing to reclaim on it. Your machine, ink, labels, servicing and licence fees are standard-rated at 20% and usually reclaimable if you are VAT registered. Premium and business services such as Tracked, Advertising Mail and Business Mail also carry VAT. A SMART meter and its VAT statement make separating the two straightforward. Stocking up on VAT-recoverable consumables such as quality envelopes and the right cartridges keeps your mailroom running while your accounts stay tidy.

Frequently Asked Questions

Is there VAT on 1st and 2nd Class franked postage?

No. Standard 1st and 2nd Class letters sent through a franking machine are part of Royal Mail's Universal Service and are exempt from VAT. There is no VAT included in the price and nothing to reclaim on that postage.

Can I reclaim VAT on franking machine ink and labels?

Yes, if your business is VAT registered and makes taxable supplies. Ink cartridges and labels are standard-rated at 20%, so the VAT you pay on them can normally be recovered on your VAT return in the usual way. Keep your supplier invoices as evidence.

Do I pay VAT on franking machine rental?

Yes. Renting or buying a franking machine is a standard-rated supply, so 20% VAT applies to the rental or purchase price and to any service or maintenance charges. VAT-registered businesses can generally reclaim this VAT.

Is Business Mail VAT exempt?

No. Business Mail with volume discounts is standard-rated at 20%, unlike ordinary franked 1st and 2nd Class letters, which stay exempt. Several other services, including Tracked 24 and 48 and Advertising Mail, are also standard-rated.

How do I get a VAT statement for my franked postage?

A SMART franking meter records the services you use and sends that data to Royal Mail, which generates a VAT statement automatically. This separates your exempt postage from any standard-rated services, giving you the paperwork you need to reclaim VAT correctly.