UK VAT Rates Explained
All the UK VAT rates (standard, reduced, zero-rated, and exempt) with examples of what falls into each category and how to apply them.
The Four UK VAT Categories
Every good or service sold in the UK falls into one of four VAT categories. Getting the classification wrong can mean owing HMRC money, missing refunds, or triggering penalties.
Standard Rate: 20%
This is the default rate for most goods and services. If an item doesn't specifically qualify for a lower rate or an exemption, it's charged at 20%. This covers electronics, furniture, clothing (except children's), alcohol, restaurant meals, professional services, vehicles, and the vast majority of retail goods.
Reduced Rate: 5%
The reduced rate applies to a specific list of goods and services including:
- Domestic gas and electricity
- Children's car seats
- Smoking cessation products (nicotine patches, gum)
- Sanitary products
- Energy-saving materials installed in residential properties
- Mobility aids for the elderly
Zero Rate: 0%
Zero-rated goods carry 0% VAT but remain within the VAT system. This matters because businesses selling zero-rated goods can still reclaim input VAT on their costs. Zero-rated items include:
- Most food and drink (not restaurant meals, hot takeaways, confectionery, crisps, alcohol, or soft drinks)
- Books, newspapers, and magazines
- Children's clothing and shoes
- Public transport
- Prescription medicines and medical equipment
- Exports of goods outside the UK
- New-build residential properties
VAT on food is full of strange edge cases. A Jaffa Cake is zero-rated (it's legally a cake), but a chocolate digestive is standard-rated (it's a biscuit covered in chocolate). A hot Cornish pasty is standard-rated, but a cold one is zero-rated. Ice cream from a van is standard-rated, but ice cream from a shop freezer is zero-rated. These cases have been tested in tax tribunals.
Exempt
Exempt supplies are completely outside the VAT system. No VAT is charged, and critically, businesses cannot reclaim input VAT on costs relating to exempt activities. Exempt items include:
- Insurance and financial services
- Education and training (by eligible bodies)
- Health services by registered practitioners
- Residential property sales and long leases
- Postal services by Royal Mail
- Burial and cremation services
- Betting, gaming, and lotteries
If you make a mix of taxable and exempt supplies, you can only reclaim input VAT proportionally. But there's a de minimis rule worth knowing: if your exempt input VAT is under £625 per month on average and less than 50% of your total input VAT, you can reclaim it all. Worth checking with your accountant.
Global VAT & GST Rates
VAT (or its equivalent, GST) is used in over 160 countries worldwide. Here's how the UK compares.
| Country | Standard Rate | Registration Threshold |
|---|---|---|
| 🇬🇧 United Kingdom | 20% | £90,000 |
| 🇩🇪 Germany | 19% | €22,000 |
| 🇫🇷 France | 20% | €37,500 / €85,000 |
| 🇮🇪 Ireland | 23% | €40,000 / €80,000 |
| 🇳🇱 Netherlands | 21% | €20,000 |
| 🇮🇹 Italy | 22% | €85,000 |
| 🇸🇪 Sweden | 25% | SEK 80,000 |
| 🇭🇺 Hungary | 27% | None |
| 🇨🇭 Switzerland | 8.1% | CHF 100,000 |
| 🇦🇺 Australia | 10% (GST) | AUD 75,000 |
| 🇨🇦 Canada | 5% (GST) | CAD 30,000 |
| 🇦🇪 UAE | 5% | AED 375,000 |
| 🇸🇬 Singapore | 9% (GST) | SGD 1,000,000 |
| 🇯🇵 Japan | 10% | ¥10,000,000 |
Want to run the numbers? Try the VAT calculator. It handles standard, reduced, and custom rates.