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Vat Rates

Vat rates

VAT rates in the UK depend on what you sell and where your customer is. Most sales use the standard rate, but some goods and services qualify for a reduced or zero rate, while others are exempt or outside the scope.

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Current UK VAT rates

  • Standard rate (currently 20%) – most goods and services.
  • Reduced rate (currently 5%) – selected categories (e.g. some domestic fuel & power, children’s car seats).
  • Zero rate (0%) – e.g. most food, children’s clothes, books/newspapers (print), public transport.
  • Exempt – e.g. postage stamps, most financial and insurance services, some education and health services.
  • Outside scope – e.g. wages, donations with no benefit, some statutory fees.

Always check HMRC guidance for detailed item rules and any rate changes.

Which rate applies?

  1. Identify the supply (what you’re selling and how it’s delivered).
  2. Check if a relief or exception applies (reduced/zero/exempt).
  3. Confirm place of supply (UK vs overseas) and whether reverse charge rules apply.
  4. Record the decision and keep evidence (product lists, contracts, correspondence).

Registration and returns

  • Registration: register when you pass (or expect to pass) the VAT registration threshold on taxable turnover.
  • Making Tax Digital (MTD): keep digital records and submit via compatible software.
  • Invoices: show VAT rate, VAT amount, and your VAT number on VAT invoices.
  • Adjustments: use credit notes for changes; apply the correct rate at the time of supply.

Common scenarios

  • Mixed supplies: if a single price covers items with different rates, apportion fairly and document the method.
  • Reduced-rate energy: domestic vs business use can change the rate—keep usage evidence.
  • Zero-rated books vs e-publications: check the format and current HMRC rules.
  • Exempt services: remember exempt sales still count towards some VAT tests even if no VAT is charged.

FAQs

Yes—zero-rated sales are taxable supplies and count towards the threshold.

Generally no; exemption usually blocks input VAT recovery.

Apply the correct rate based on the tax point (invoice/payment/shipment). Keep records showing why a rate was used.

Stay updated

VAT rules change. Review your key product/service list each quarter and document rate decisions. Ftax keeps your VAT submissions MTD-compliant so you can focus on getting the rate right.

File Now with Ftax

Ftax for Business (MTD) VAT

Ftax Business MTD for VAT (2025/26)

1 Credits
£11.00
More Info
Buy Now

Disclaimer

Ftax does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult with your own professional advisors or with HMRC for advice directly relating to your business before taking action in relation to any of the content provided. Ftax Support will only be able to assist you with matters directly concerning the Ftax products and service.