The standard rate of VAT in the UK is 20%. This VAT rate is applicable to most goods and services.
The reduced rate is 5% and there is also a zero rate of 0%.
VAT registered businesses have to charge VAT on most goods and services they supply to businesses and individuals in the UK and EU. The standard rate of VAT a business has to charge is 20%.
However, for certain goods and services there are different VAT rates.
Standard rate – 20%:
- An iPad a person buys from an Apple store in the UK has 20% VAT included in the price.
- This VAT amount (use our VAT calculator to work out how much it is 🙂) is the value added tax a consumer pays for this product.
- However, if a VAT registered business buys an iPad for the use of the business, then it claim the VAT amount back from HMRC.
Reduced rate – 5%:
- Domestic heating fuel and children’s car seat are charge at a reduced rate of 5%.
- If a consumer buys a children’s car seat for £105.00, then the consumer has paid £5.00 in value added tax.
- If children’s car seats were charged at the standard rate of VAT (20%), then it would cost £120.00 and the consumer would pay £20.00 in value added tax.
Zero rate – 0%:
- Some goods and services are zero rated meaning VAT is still charged on an invoice, but the VAT amount is £0.00 because it is a 0% VAT rate.
- This means no VAT is charged on these goods and services
- Goods and services such as services from doctors and dentists and some types of training and education are exempt from VAT
- On these purchases, you will not normally see any VAT charged or accounted for on an invoice and businesses don’t include these transactions in their VAT accounts.
Outside the scope of VAT:
- Some goods and services are completely out of scope of VAT, so not VAT is charged whatsoever.
- Examples: MOT tests, congestion charges, tolls for bridges roads etc. and more.
VAT rates explained (HMRC link)