VAT rates explained: standard, reduced, zero, exempt

Different rates of VAT apply to different types of goods and services, and there are some goods and services that aren't taxable for VAT at all. So you need to know whether VAT applies to the goods or services you sell and how much to charge.

You also need to know the right amount of VAT to reclaim on what you buy, because you can only claim back what you should have been charged - if your supplier charges you too much, you can't claim all of it back.

This guide tells you about the different rates of VAT and how to work out the VAT you should charge. It also tells you about goods or services that are exempt from VAT, or outside the scope of VAT.

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VAT rates

If you're registered for VAT, you have to charge VAT at the standard rate on all goods and services you supply, unless they fall into one of these categories:

  • zero-rated
  • reduced-rated
  • exempt from VAT
  • outside the scope of VAT

For more information on what's exempt from VAT or outside the scope, see the section in this guide on when VAT mustn't be charged.

There are currently three rates of VAT:

  • standard rate - currently 20 per cent
  • reduced rate - currently 5 per cent
  • zero rate - this is not the same as exempt or outside the scope of VAT

Find out what goods and services the different rates of VAT apply to

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Standard rate of VAT

If you are registered for VAT, you have to charge VAT at the standard rate on all goods and services you supply, unless they fall into another category. See the section in this guide on VAT rates.

Find out how to calculate VAT and VAT-inclusive totals, or calculate the VAT from a VAT-inclusive amount

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Reduced rate of VAT - what it applies to and how to calculate it

What the reduced rate of VAT applies to

A reduced rate of VAT applies to some goods and services - including items such as domestic heating fuel and children's car seats. Sometimes the reduced rate only applies in certain circumstances, or it may depend on who the customer is. It's important to read the detailed rules.

Find out what goods and services the reduced rate of VAT applies to

Find the right VAT rates and rules for businesses in particular trade sectors

Find out how to calculate VAT and VAT-inclusive totals, or calculate the VAT from a VAT-inclusive amount

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Zero rate of VAT - what it applies to

There are some goods and services that are zero-rated. This means that they're taxable for VAT, but the VAT rate is zero per cent. Sometimes the reduced rate only applies in certain circumstances, or it may depend on who the customer is. It's important to read the detailed rules.

If you sell zero-rated goods or services, you can generally reclaim VAT on any purchases that relate to those sales. This is in contrast to if you sell only exempt goods or services, where you cannot normally reclaim VAT on your purchases - see the section on when VAT mustn't be charged.

If you sell or otherwise supply zero-rated goods or services:

  • you charge VAT at zero per cent - so there's no charge, but you must show VAT information on your invoice
  • you enter the transaction into your VAT accounts
  • you include the value on your VAT Return
  • you may be able to claim back the VAT back on related purchases

Find out what goods and services are zero-rated for VAT

Find the right VAT rates and rules for businesses in particular trade sectors

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When VAT mustn't be charged

VAT is not charged (so it can't be reclaimed) on goods and services that are:

  • exempt from VAT
  • outside the scope of VAT

VAT must also not be charged by a business that isn't registered for VAT.

Exempt goods and services

There are some goods and services that are exempt from VAT. Exempt goods and services are not taxable for VAT, so if you supply them, then:

  • you don't charge any VAT on them
  • you don't include them in your VAT accounts
  • you can't normally claim back the VAT on related purchases

Goods and services that are exempt from VAT include:

  • insurance (but there is an Insurance Premium Tax (IPT) that may apply instead)
  • some services from doctors and dentists
  • some types of education and training

If you sell or otherwise supply only exempt goods or services, you cannot register for VAT and you cannot charge VAT. If you buy exempt goods or services, you aren't charged VAT so there is none to claim back.

If you sell some exempt goods or services and some goods or services that are taxable for VAT, your business is 'partly exempt' and you will only be able to reclaim VAT related to the VAT taxable goods and services you sell.

Find out about exempt and partly-exempt supplies and businesses

Find out what goods and services are exempt from VAT

Goods and services outside the scope of VAT

Some goods and services aren't covered by the UK VAT system at all - they're outside the scope of VAT.

You don't charge VAT on goods or services that are outside the scope of VAT. If you buy anything that's outside the scope of UK VAT, you won't be charged UK VAT so you can't claim it back.

Goods and services that are outside the scope of UK VAT includes anything you:

  • sell (or otherwise supply) when you're not registered for VAT - and you don't need to be registered
  • buy or sell outside the European Union (EU)
  • sell (or otherwise supply) but not as part of your business - for example, if you occasionally receive income from sources such as leisure activities or hobbies
  • buy and sell for your own personal use, such as a hobby

Other goods and services outside the scope of VAT include:

  • donations to charity freely given by a business where the giver does not receive anything in return
  • statutory fees and services, eg MOT testing, congestion charge
  • tolls for bridges, tunnels and roads operated by public authorities
  • low cost welfare services provided by charities

Goods or services you supply within the EU may be inside or outside the scope of UK VAT, depending on the particular transaction.

Get information about VAT and trading with businesses in other EU countries

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How to find the right VAT rate for particular goods and services

It's important that you know the right VAT rate for the goods and services that you buy and sell. In some cases, the correct rate of VAT depends not just on the goods or services themselves, but also on other conditions and the circumstances of the sale. For some trade sectors there are special rules about how much VAT to charge or reclaim in particular circumstances.

Find the right VAT rate for particular goods or services

Find the right VAT rates and rules for businesses in particular trade sectors

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