In this section:
- VAT rates explained: standard, reduced, zero, exempt
- Goods and services by VAT rate
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. You need to know the right amount of VAT to charge on the goods or services you sell and the right amount of VAT to reclaim on what you buy.
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 are exempt from VAT or outside the scope of VAT.
On this page:
- VAT and VAT rates
- VAT rates and how to calculate VAT using a VAT rate
- When VAT doesn't have to be charged
- How to find the right VAT rate for particular goods and services
VAT and VAT rates
There are different rates of VAT that apply to different types of goods and services. And there are some goods and services that aren't taxable for VAT.
You need to know the right amount of VAT to charge on the goods or services you sell and the right amount of VAT to reclaim on what you buy.
The rates of VAT and the goods and services on which VAT is charged at these rates are changed from time to time, usually when the Chancellor of the Exchequer announces the change in the Budget. So you'll need to check regularly to make sure you're using the correct VAT rates.
Check the current VAT rates in VAT Notice 700
VAT rates and how to calculate VAT using a VAT rate
There are currently three rates of VAT:
- standard rate - 17.5 per cent
- reduced rate - 5 per cent
- zero rate - 0 per cent
Standard rate - 17.5 per cent
On most goods and services VAT is chargeable at the standard rate. The standard rate is the default rate for goods and services unless:
- an item or category is zero-rated, reduced-rated, exempt or outside of the scope of UK VAT - see below for explanations of each of these
- a particular item is standard-rated by excluding it from a reduced-rated or zero-rated category (such as crisps and confectionary being excluded from the food zero-rate)
Find out on which goods and services VAT is charged at the standard rate
The following example shows you how to work out the VAT - and the VAT-inclusive price - where the price before VAT is £100 and the standard rate of VAT applies.
| Item | Amount |
|---|---|
| Price excluding VAT | £100.00 |
| VAT rate 17.5% | |
| VAT (17.5% x £100) | £17.50 |
| Price including VAT | £117.50 |
In other words, the VAT-inclusive price of a standard-rated item is 1.175 times the VAT exclusive price.
If you only know the VAT-inclusive price, and you want to find the amount of VAT to pay or reclaim and also the ex-VAT price, you perform the same calculation above, but in reverse. Alternatively you can calculate the VAT element by multiplying the VAT-inclusive price by the standard-rated VAT fraction: currently 7/47.
Find out how to work out the VAT in a standard-rated VAT-inclusive price
Reduced rate - 5 per cent
A reduced rate of VAT applies to some goods and services - including items such as, domestic heating fuel and children's car seats.
Find out on which goods and services VAT is charged at the reduced rate
The following example shows you how to work out the VAT and the VAT-inclusive price where the price before VAT is £100 and the reduced rate of VAT applies.
| Item | Amount |
|---|---|
| Price excluding VAT | £100.00 |
| VAT rate 5% | |
| VAT (5% x £100) | £5.00 |
| Price including VAT | £105.00 |
In other words, the VAT-inclusive price of a reduced-rated item is 1.05 times the VAT exclusive price.
If you only know the VAT-inclusive price, and you want to find the amount of VAT to pay or reclaim and also the VAT exclusive price, you perform the same calculation above, but in reverse. Alternatively you can calculate the VAT element by multiplying the VAT-inclusive price by the reduced-rated VAT fraction: currently 1/21.
Find how to work out the VAT on a reduced rate VAT-inclusive price
Zero rate - 0 per cent
There are some goods and services that are zero-rated. This means that they're taxable for VAT, but the VAT rate is 0 per cent.
If you sell zero-rated items, you can generally reclaim VAT on your purchases. This is in contrast to if you sell only exempt items, where you cannot reclaim VAT on your purchases (see below).
Find out what goods and services are zero-rated for VAT
When VAT doesn't have to be charged
VAT is not charged (therefore it cannot be reclaimed) on goods and services that are:
- exempt from VAT
- outside the scope of VAT
Exempt items
There are some goods and services that are exempt from VAT. Exempt goods and services are not taxable for VAT.
Items exempt from VAT include insurance, some services from doctors and dentists and some types of education and training.
If you sell or otherwise supply exempt items, you cannot register for VAT and you cannot charge VAT. If you buy exempt items, you cannot reclaim any VAT.
If you sell some exempt items and some VATable items, your business is 'partly exempt' and you will only be able to reclaim VAT related to the VATable items you sell.
There's an important difference between goods and services that are exempt from VAT and those that are zero-rated. If you sell or otherwise supply zero-rated items, you can claim the VAT back on your purchases.
Find out about exempt and partly-exempt supplies and businesses
Find out what goods and services are exempt from VAT
Items 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 nor reclaim VAT on goods or services that are outside the scope of VAT including any items that you:
- sell or otherwise supply when you're not registered for VAT - and you don't need to be registered
- buy and sell outside the UK
- don't sell or otherwise supply as part of your business
- buy and sell for your own personal use such as a hobby
Other items 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 European Union (EU) can 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
Find out what goods and services are outside the scope of VAT
Find out when you can reclaim VAT and when you can't
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.
