What VAT Code should I use for bank charges paid?

At Sage Accounts Solutions we get so many questions about tax codes. We’ve had lots of recent questions arise in our Facebook Groups too, where like minded Sage users hang out and help each other with queries just like this. If you’re not already a member, then please join us!

What code should you use for bank charges paid?

It is quite common for people to use 1 of 3 tax codes in Sage 50 for bank charges paid. Those being T0 (Zero rated transactions), T2 (Exempt transactions) or T9 (Transactions not involving VAT or outside the scope). We can see why there is so much confusion around this but the correct tax code you should use is T2.

The HMRC VAT notice VAT Notice 701/49: finance under section 2.10 states that charges made by banks relating to current accounts, deposit accounts or savings accounts will be exempt from VAT. The exceptions to this rule are:

  • Financial Certificates (ie, audit and balance certificates)
  • Bespoke printing or overprinting of cheque books and paying in books

It’s important to conclude that this list is not exhaustive.

As charges of this nature are exempt in most cases then the correct tax code to use for Sage 50 is T2 by default, but we always recommend you check your tax code settings which can be found under the Settings menu, then Configuration and then Tax Codes.

Due to the confusion which arises with Tax Codes we have put a Sage 50 Tax Codes Guide together for you to simply download it here!


“Any advice relating to accounts or tax should be sought from your tax accountant. Sage Accounts Solutions Limited will not be held responsible for any loss or damage caused as a result of the information contained herein.”

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