The UK applies four different VAT treatments to goods and services. Knowing which rate applies to your supply — and why — is fundamental to charging correctly, reclaiming accurately, and avoiding the errors HMRC most commonly identifies in inspections.
Use the VAT Calculator to apply any of these rates to a specific amount instantly.
The standard rate applies to the majority of goods and services sold in the UK. If a supply is not specifically listed as reduced, zero-rated, or exempt, it is standard-rated by default.
Common standard-rated supplies:
The reduced rate applies to a specific, limited list of goods and services set by HMRC. It cannot be applied by choice to other supplies.
Reduced-rated supplies:
Zero-rated supplies are taxable supplies — they just carry a VAT rate of zero. This means they count towards your VAT registration threshold and you can reclaim input VAT on costs related to making them.
Zero-rated supplies:
Exempt supplies are not taxable. They do not count towards your registration threshold and you cannot reclaim input VAT on costs directly related to making them.
Exempt supplies:
This distinction catches out even experienced business owners. Both result in the customer paying no VAT — but they work completely differently for the business.
| Feature | Zero-Rated (0%) | Exempt |
|---|---|---|
| Customer pays VAT | No | No |
| Counts toward £90,000 threshold | ✅ Yes | ❌ No |
| Can reclaim input VAT on related costs | ✅ Yes | ❌ No |
| Appears on VAT return | ✅ Yes | ❌ No |
| Affects partial exemption calculations | No | ✅ Yes |
A business with significant exempt supplies may face partial exemption — meaning only a proportion of its total input VAT can be recovered. The calculations can become complex. If your business has both taxable and exempt supplies, this is an area where professional advice pays for itself.
Food and drink is mostly zero-rated — but the exceptions are significant.
Zero-rated food (no VAT):
Standard-rated food (20% VAT):
The same sandwich is zero-rated in a supermarket and standard-rated in a café where it is served to eat in. This is not a grey area — HMRC has published detailed guidance and case law exists on almost every category.
Construction is the most rate-complex sector in the UK VAT system.
| Construction Type | VAT Rate |
|---|---|
| New residential build | 0% — zero-rated |
| New commercial build | 20% — standard |
| Renovation / repair of existing home | 20% — standard |
| Converting commercial to residential | 5% — reduced |
| Listed building alterations (approved) | 0% — zero-rated |
| Refurbishing empty residential property | 5% — reduced |
Getting this wrong on a large project is a serious error. Always reference HMRC Notice 708 and check with a specialist construction VAT adviser before issuing invoices. The reverse VAT calculator can help verify figures once the correct rate is confirmed.
Digital services sold to UK consumers — apps, software, streaming, downloads, online courses — are always standard-rated at 20%, regardless of where the seller is based. An overseas business selling digital services to UK consumers with UK revenue above £90,000 must register for VAT with HMRC.
If you are unsure which rate applies, work through this sequence:
The default is always standard rate. Zero-rating and exemption are exceptions that must be specifically justified.
The standard rate is 20%, unchanged since January 2011. It applies to most goods and services not specifically listed as reduced, zero, or exempt.
Most food is zero-rated. The main exceptions are hot food, food consumed on catering premises, confectionery, alcoholic drinks, and energy/sports drinks — all of which are standard-rated at 20%.
Zero-rated supplies count toward your registration threshold and allow input VAT recovery. Exempt supplies do neither. Both result in the customer paying no VAT, but the business treatment is completely different. Full details in the section above.
Printed books, newspapers, and magazines are zero-rated. Most e-books and digital publications are also zero-rated following a 2020 rule change. Academic and educational materials generally follow the same treatment.