VAT rates explained

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VAT can be confusing, so we’ve put together a quick overview of the most common VAT rates and how they’re applied.

Standard VAT rate

This is the one you will be most familiar with. Most vatable goods and services will attract a 20% rate of VAT. The standard rate has previously been pegged at 15% and 17.5%.

Reduced VAT rate

The reduced rate of VAT is currently 5% and applies predominantly to domestic energy supplies and infrastructure.

Zero rate

Zero rated items, as you guessed it, carry no VAT. A large number of food and drink products are zero rated, along with baby clothes and printed materials such as newspapers, magazines and books (excluding e-books).

Sales invoices that are zero rated will still be reported on box 6 of your VAT return, likewise purchase invoices that are zero rated will be reported in box 7.

Exempt sales

Exempt sales often include (but not limited to) educational services, medical care and health services provided by doctors, opticians, dentists and pharmacists. Some Royal Mail services are also VAT exempt, this is a common expense for many businesses so it’s worth checking your invoice in detail.

Sales invoices that are marked as “Exempt” will be reported in box 6 of your VAT return.

Outside the scope of UK VAT

Some items are outside the scope of UK VAT. In QuickFile applying the “out of scope” option on your invoice will completely exclude those invoices from your VAT return. This will mean that not only will there be no input or output VAT reported in boxes 1 and 4 respectively, these invoices will also be excluded from boxes 6 and 7 of your VAT return.