Vat Rates


The term ‘supplies’ is used when describing the goods and services a business sells. It is important for a business to classify it’s supplies correctly to determine whether to charge VAT to its customers. Supplies can be classified as either outside the scope of VAT, exempt or taxable. VAT is only charged on taxable supplies.  

In this article we will discuss taxable supplies in greater detail. If you would like to read more about exempt supplies and supplies outside the scope of VAT, read this guide. 

The three rates of VAT

Taxable supplies are charged to VAT at one of these three rates:

  • Zero rate
  • Reduced rate
  • Standard rate

Zero rate

Zero rate – this is a tax rate of nil. There is no VAT charged to the customer. Some examples of zero rated items include:

  • Water
  • Most foods
  • Children’s clothing and shoes
  • Public transport
  • Books and newspaper
  • Advertising services for charities

Reduced rate

Reduced rate – Some goods and services are charged at the reduced rate of 5%. Examples of reduced rate items include:

  • Children’s car seats
  • Home energy (gas and electricity) 
  • Nicotine patches and other items that help people to stop smoking
  • Mobility aids for the elderly

Standard rate

Most sales of goods and services in the UK are charged VAT at the standard rate of 20%.

20th December 2021