About VAT: Rates for UK users

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%)

The cases when this rate is charged may depend on the supplied item and the occasion 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:

• insurance

• postage stamps or services

• health services provided by doctors

VAT Registration

Businesses that sell only VAT-exempt goods and services can’t register for VAT.

If you start selling non-exempt items, you can voluntarily register for VAT. You must register if the total value of non-exempt goods and services exceeds the taxable turnover threshold.

Out of scope

Some goods and services are outside the VAT tax system so you cannot charge or reclaim 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