Standard rate (20%)
Most goods and services are standard rate. You should charge this rate unless the goods or services are classed as reduced or zero-rated.
Reduced rate (5%)
When to charge this rate can depend on the item being provided but also the circumstance of the sale. For example:
- children’s car seats and domestic fuel or power are always charged at 5%
- mobility aids for older people are only charged at 5% if they’re for someone over 60 and the goods are installed in their home
Zero rate (0%)
Zero-rated means that the goods are still VAT-taxable, but the rate of VAT you must charge your customers is 0%. Examples of zero-rated goods include:
- books and newspapers
- children’s clothes and shoes
- motorcycle helmets
You still have to record zero-rated transactions in your VAT accounts and report them on your VAT Return.
When not to charge VAT
You can’t charge VAT on exempt or ‘out of scope’ items.
Exempt goods and services
Exempt goods or services are supplies that you:
- can’t charge VAT on
- must not include in your VAT records
If you buy or sell an exempt item you should still record the transaction in your general business accounts. Examples of exempt items include:
- postage stamps or services
- health services provided by doctors
Businesses that sell only VAT-exempt goods and services can’t register for VAT.
If you start selling items that aren’t exempt, you can register for VAT voluntarily. You must register if the total value of non-exempt goods and services goes over the VAT taxable turnover threshold.
Out of scope
Some goods and services are outside the VAT tax system so you can’t charge or reclaim the VAT on them. For example, out of scope items include:
- goods or services you buy and use outside of the EU
- statutory fees - like the London congestion charge
- goods you sell as part of a hobby - like stamps from a collection
- donations to a charity - if given without receiving anything in return