UK VAT Rates Explained: Standard, Reduced, Zero and Exempt Treatments

Getting the VAT rate right on UK invoices matters, since errors can mean overcharging clients or owing HMRC uncollected tax. The standard rate of 20 percent covers most goods and services, including electronics, adult clothing, restaurant meals and most professional and software services. A reduced 5 percent rate applies to a narrow set of items such as home energy, energy-saving installations, children's car seats and mobility aids. Zero-rated supplies are still taxable, meaning businesses charge nothing but can reclaim input VAT, unlike exempt supplies such as insurance, finance and most health services, where input VAT recovery is not allowed. Items outside the VAT system entirely, like statutory fees and wages, complete the framework, and freelancers are advised to check rates before quoting and show rates per line item.