Key takeaways
- The UK has three VAT rates: 20% standard, 5% reduced and 0% zero rate. None changed for 2026/27.
- Zero-rated and exempt supplies both carry no VAT, but zero-rated sales let you reclaim VAT on costs and count towards the registration threshold; exempt sales do not.
- Items outside the scope of VAT, such as wages, dividends and most grants, are not supplies at all.
- Private school fees have been standard-rated since 1 January 2025.
- To find the VAT inside a VAT-inclusive price at 20%, divide by 6; at 5%, divide by 21.
Every sale a VAT-registered business makes falls into one of four groups: standard-rated, reduced-rated, zero-rated or exempt. A fifth group, outside the scope, covers money that is not payment for a supply at all. Which group a sale belongs to decides what you charge and, just as importantly, whether you can reclaim VAT on the costs behind it.
VAT rates for 2026/27
| Rate | % | Examples |
|---|---|---|
| Standard rate | 20% | Most goods and services: adult clothing, electronics, furniture, professional services, restaurant meals, alcohol, confectionery, private school fees |
| Reduced rate | 5% | Domestic fuel and power, children’s car seats, smoking cessation products, contraceptives, some residential conversions and renovations, mobility aids installed for older people |
| Zero rate | 0% | Most food, children’s clothes and shoes, books, newspapers and e-publications, public passenger transport, new homes, prescribed medicines, exports of goods, women’s sanitary products, energy-saving materials installed in homes (to 31 March 2027) |
| Exempt | No VAT | Insurance, most financial services, education and training by eligible bodies, health care by registered professionals, residential rents, betting, burial and cremation |
The rates have not changed since the standard rate rose to 20% in January 2011, although individual goods and services have moved between categories over time. HMRC’s guide to VAT rates on different goods and services lists hundreds of specific items.
Zero-rated, exempt and outside the scope
These three are often confused because none of them involves charging VAT. The differences matter:
| Zero-rated | Exempt | Outside the scope | |
|---|---|---|---|
| VAT charged to customer | 0% | None | None |
| Counts towards the £90,000 registration threshold | Yes | No | No |
| Can reclaim VAT on related costs | Yes | No | Depends on the activity |
| Shown in box 6 of the VAT return | Yes | Yes | Only some items, such as certain overseas services |
A business selling only zero-rated goods, such as a greengrocer, is often in a VAT repayment position: it charges no VAT but reclaims the VAT on its costs. A business making only exempt supplies, such as an insurance broker, cannot register for VAT and cannot reclaim anything. Businesses making both are partly exempt; see partial exemption.
Examples of outside the scope
- wages and salaries, and dividends
- statutory fees charged by public bodies, such as Companies House filing fees
- donations given freely with nothing supplied in return
- most grants
- compensation and damages that are not payment for a supply
- services supplied to overseas business customers, where the place of supply is outside the UK
Food and drink: the most complicated area
Most food for human consumption is zero-rated, but there are many exceptions:
| Zero-rated | Standard-rated |
|---|---|
| Bread, meat, fish, fruit, vegetables, milk | Confectionery, chocolate biscuits, crisps and savoury snacks |
| Cold takeaway food such as sandwiches | Hot takeaway food and drink |
| Cakes and most biscuits (not chocolate-covered biscuits) | Ice cream and frozen yoghurt |
| Tea, coffee and cocoa for making at home | Alcohol, soft drinks, mineral water and fruit juices |
| Food and drink for consumption on the premises (catering) |
Catering is standard-rated, so a café charges 20% on a sandwich eaten at a table but can zero-rate the same sandwich sold cold to take away.
Notable recent changes
| Date | Change |
|---|---|
| 1 May 2020 | E-books, e-newspapers and other e-publications zero-rated (audiobooks remain standard-rated) |
| 1 January 2021 | Women’s sanitary products zero-rated |
| 1 April 2022 | Installation of energy-saving materials in homes zero-rated in Great Britain, extended UK-wide from 1 May 2023 and due to end on 31 March 2027 |
| 1 January 2025 | Education and boarding services provided by private schools for a charge became standard-rated |
How to calculate VAT
- Adding VAT at 20%: multiply the net price by 1.2. A £250 net price becomes £300.
- Finding VAT in a 20% gross price: divide by 6. £300 contains £50 VAT.
- Adding VAT at 5%: multiply by 1.05.
- Finding VAT in a 5% gross price: divide by 21. £105 contains £5 VAT.
Our VAT calculator does both directions.
Mixed and composite supplies
When you sell several things together for one price, you need to decide whether it is:
- a single supply with one VAT rate, where the extras are ancillary to a main element (for example, delivery of a zero-rated book is part of the supply of the book), or
- a multiple supply, where the price must be split fairly between elements at different rates (for example, a hamper of zero-rated food and standard-rated wine)
Getting this wrong is a common cause of HMRC assessments in retail and hospitality.
Frequently asked questions
What is the standard rate of VAT in the UK?
20%. It has been 20% since 4 January 2011 and applies to most goods and services.
What is the difference between zero-rated and exempt?
Both have no VAT charged. Zero-rated sales are taxable supplies, so they count towards the registration threshold and let you reclaim VAT on costs. Exempt sales are not taxable, do not count towards the threshold and do not give a right to reclaim VAT.
Is food VAT-free in the UK?
Most basic food is zero-rated, but confectionery, crisps, soft drinks, alcohol, ice cream, hot takeaway food and food eaten on the premises are standard-rated.
What items have 5% VAT?
The main ones are domestic gas and electricity, children’s car seats, smoking cessation products, contraceptives, certain residential conversions and renovations, and mobility aids installed in the homes of people aged 60 or over.
Do private schools charge VAT?
Yes. Since 1 January 2025, fees for education and boarding at private schools are standard-rated at 20%.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.