Key facts
- Standard VAT is 20%, reduced rate is 5%, and zero rate is 0% on qualifying goods
- Exempt supplies carry no VAT and are outside the registration threshold
- You must register once taxable turnover exceeds £90,000 in a rolling 12 months
- A £100 standard-rated item costs £120; reduced rate adds £5 and zero or exempt stays at £100
Once your turnover nears the limit, see when and how to sign up in VAT registration guide, and how VAT fits the wider tax picture in corporation tax rates guide.
| VAT category | Rate | Typical examples |
|---|---|---|
| Standard rate | 20% | Most goods and services, electronics, adult clothing |
| Reduced rate | 5% | Home energy and domestic fuel, children's car seats |
| Zero rate | 0% | Most food, books and newspapers, children's clothes and shoes |
| Exempt | No VAT | Insurance, most financial services, postage stamps, some education and healthcare |
A £100 item plus standard VAT costs £120. Source: GOV.UK VAT rates, June 2026.
Zero-rated and exempt sound the same to a shopper but differ for a business. Zero-rated sales are still taxable, just at 0%, so they count towards the £90,000 VAT registration threshold and the business can reclaim the VAT on its own costs. Exempt sales are outside VAT altogether, do not count towards the threshold, and a business making only exempt supplies cannot register or reclaim VAT on its costs.
Work out the VAT on any price with the VAT calculator.
UK VAT Rates 2026/27 at a Glance
| VAT Rate | Rate | Applies To |
|---|---|---|
| Standard rate | 20% | Most goods, services, alcohol, electronics, clothing (adult) |
| Reduced rate | 5% | Domestic energy, children's car seats, mobility aids, nicotine patches |
| Zero rate | 0% | Food (most), children's clothing, books, newspapers, public transport, prescription drugs |
| Exempt | N/A | Insurance, financial services, private education, health services, postage stamps |
Exempt items are different from zero-rated. Businesses making only exempt supplies cannot register for VAT or reclaim input VAT. Source: HMRC VAT Notice 700.
What Is Charged at 20%?
| Category | Examples |
|---|---|
| Electronics | Phones, laptops, TVs, appliances |
| Clothing (adult) | All adult clothing and footwear |
| Alcohol and tobacco | Beer, wine, spirits, cigarettes |
| Hospitality | Restaurant meals, hotel accommodation, takeaway hot food |
| Professional services | Legal fees, accountancy, consultancy, marketing |
| Software and digital | SaaS subscriptions, apps, streaming services |
| New residential property | Builder's work on new homes (standard rated) |
| Motor vehicles | Cars, vans, motorcycles (new and used) |
This list is illustrative. HMRC's VAT Notices and the UK Trade Tariff provide definitive commodity-level guidance.
What Is Charged at 5%?
| Category | Examples | Conditions |
|---|---|---|
| Domestic energy | Gas, electricity, heating oil for homes | Residential use only; business energy at 20% |
| Children's car seats | Child car seats, booster seats | For children under specific age/weight |
| Mobility aids | Stairlifts, grab rails, ramps | For people over 60 or disabled |
| Smoking cessation | Nicotine patches, gum, sprays | Sold in pharmacies |
| Energy-saving materials | Solar panels, insulation | Residential installations |
| Sanitary products | Tampons, pads, menstrual cups | Reduced from 20% in 2021 |
| Renovation | Renovating homes empty for 2+ years | Reduced rate applies to the work |
Source: HMRC. Conditions apply to each reduced-rate supply.
What Is Zero-Rated?
| Category | Examples | Key Exclusions |
|---|---|---|
| Food | Bread, milk, meat, vegetables, cereals | Hot food, crisps, confectionery, alcoholic drinks are 20% |
| Children's clothing | Clothing and footwear under age 14 sizing | Adult-sized children's clothing may be 20% |
| Books and newspapers | Physical books, magazines, maps | Electronic books: 0% since 2020 |
| Public transport | Bus, train, air tickets | Private charter and hire may differ |
| Prescription medicines | NHS prescriptions, qualifying drugs | Over-the-counter non-qualifying medicines at 20% |
| Exports outside UK | Goods exported to non-UK customers | Evidence of export required |
Source: HMRC VAT Notice 700/1.
Digital Services Since Brexit
Since 1 January 2021, UK businesses supplying digital services to non-UK customers face different rules in each country. UK VAT no longer applies to B2C digital supplies to EU customers. Instead, the supplier must register in each EU country or use the EU's OSS scheme. This significantly affects UK SaaS businesses selling into Europe.VAT Registration Threshold and Rules
You must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period. Construction businesses approaching this threshold should also check their CIS obligations, as VAT and CIS requirements often arise at similar turnover levels.
| Threshold | Amount | Action Required |
|---|---|---|
| Registration threshold | £90,000 | Must register within 30 days of exceeding |
| Deregistration threshold | £88,000 | Can deregister if taxable turnover falls below |
| Voluntary registration | Any turnover | Can register below threshold to reclaim input VAT |
| Distance selling (EU goods) | Country-specific | Must register in each EU country above local threshold |
Source: HMRC. VAT registration threshold has been £90,000 since April 2024.
VAT Calculator 2026/27
Add or remove VAT instantly. Switch between 20%, 5%, and custom rates. Calculate VAT-inclusive and VAT-exclusive amounts, and see the VAT element separately. Includes a reverse VAT calculator.
Flat Rate Scheme: A Simpler Option
The VAT Flat Rate Scheme (FRS) allows small businesses (taxable turnover below £150,000) to pay a fixed percentage of gross turnover. Rates vary by sector. If you run a limited company under the FRS, your corporation tax liability is calculated on profits after the FRS VAT payment, making the interaction between the two taxes important to model correctly.
| Business Type | Flat Rate % | Effective Saving vs 20% |
|---|---|---|
| Accountancy / bookkeeping | 14.5% | May save on low-cost businesses |
| Computer and IT consultancy | 14.5% | - |
| Management consultancy | 14% | - |
| Retailer (food / confectionery) | 4% | Often profitable vs standard scheme |
| Catering (incl. restaurant) | 12.5% | - |
| Builder (general construction) | 9.5% | - |
| 'Limited cost trader' surcharge | 16.5% | Applies if costs < 2% of turnover |
Source: HMRC VAT Notice 733.
Making Tax Digital for VAT
All VAT-registered businesses must use Making Tax Digital (MTD) compatible software to submit VAT returns and keep digital VAT records. Using a spreadsheet alone is not sufficient. It must be linked to MTD-compatible submission software. HMRC can issue penalties for non-compliance with MTD record-keeping requirements even if VAT is paid on time.Related Calculators
Frequently Asked Questions
There are three: the standard rate of 20% on most goods and services, a reduced rate of 5% on items such as home energy and children's car seats, and a zero rate of 0% on most food, books and children's clothes. Separately, some supplies like insurance are exempt and carry no VAT.
Zero-rated goods are taxable at 0%, so they still count towards the £90,000 registration threshold and the business can reclaim VAT on its costs. Exempt goods carry no VAT, do not count towards the threshold, and a business selling only exempt items cannot register for VAT or reclaim it on purchases.
Most food, books, newspapers, and children's clothes and shoes are zero-rated, so you pay no VAT. Insurance, most financial services, postage stamps and some education and healthcare are exempt. Everyday standard-rated items like electronics, adult clothing and restaurant meals still carry 20% VAT.
Most food is zero-rated, so there is no VAT on basic groceries. However, VAT at 20% applies to food eaten in or hot takeaway food, confectionery, crisps, soft drinks and alcohol. So a supermarket loaf is VAT free but a hot meal or a chocolate bar is standard-rated.
The reduced rate is 5% and applies to a limited list including domestic energy and fuel, children's car seats, mobility aids for older people and some home insulation. It is lower than the 20% standard rate but, unlike the zero rate, still adds VAT to the price.
You must register for VAT once your taxable turnover goes over £90,000 in any rolling 12 months, or if you expect to pass it in the next 30 days. You can deregister if your taxable turnover falls below £88,000. Only non-exempt sales count towards these figures.
At the standard rate you add 20%, so a £100 item becomes £120. To find the VAT inside a VAT-inclusive price, divide by 6 for standard-rated goods, so a £120 price contains £20 of VAT. At the reduced rate you add 5%, turning £100 into £105.
If you are VAT registered, you can usually reclaim the VAT on goods and services bought for the business, including on zero-rated sales activity. You cannot reclaim VAT relating to exempt sales. You offset the VAT you reclaim against the VAT you charge customers on your VAT return.
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James Hartley is a CIMA qualified financial analyst and Founder and Lead Financial Analyst at WhatsUK, with 8+ years in UK tax, payroll, and compliance. He builds every calculator on WhatsUK and authors all editorial content, ensuring every figure is verified against official HMRC sources before publication.
Sources & Official References
- HMRC VAT Notice 700: The VAT Guide- Rate classification for all goods and services
- HMRC VAT Rates on Different Goods and Services- Full official rate schedule
- HMRC Flat Rate Scheme Percentages- Sector-specific flat rate percentages
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Disclaimer: This calculator provides estimates based on standard HMRC rates for 2026/27. Results may vary based on individual circumstances. This is not financial advice. Always consult a qualified accountant or CIMA-qualified financial adviser for personal tax matters.