VATupdate

VAT Rates in the United Kingdom

Quick overview

Standard Rate Reduced Rate Other Rates
20% 0%, 5%, 12,5%

There are basically 4 VAT rates in the United Kingdom

  • Standard VAT rate is 20%
  • Reduced VAT rate is 0%, 5% and 12,5%

Recent developments

Due to COVID-19, the United Kingdom temporarily reduced the VAT on tourism and hospitality, click here.

  • Till September 30, 2021, the reduced VAT rate will be 5%
  • Between October 1, 2021 and March 31, 2022, the VAT rate will be 12.5%
  • As of April 1, 2022, the VAT rate will again be 20%

Standard rate: 20%

This rate applies for all transactions that take place in the United Kingdom, unless an exception applies (such as a reduced rate, the zero rate or an exemption, or a reason to treat the transaction as outside scope of VAT).

Zero rate (0%)

  • Books, newspapers and periodicals (from 1 May 2020, this also applies to digital formats of
    these publications)
  • Certain foodstuffs
  • Children’s clothing and footwear incl. diapers
  • Drugs and medicines supplied by prescription
  • New housing

The United Kingdom applies various exemptions with a refund of tax paid at preceding stages (zero rates), such as international transport, exports of goods (and related services) to non-EU countries, and services to goods and goods under customs control.

  • Betting and gaming
  • Education
  • Finance
  • Insurance
  • Land and buildings (in most cases
    • Remark: Option to tax for exempt supplies. The UK operates an option to tax in respect of land and buildings. However, certain supplies of land and buildings are not affected by an option to tax (generally buildings intended for residential use or a qualifying charitable use).
  • Postal services (in most cases)
  • Human blood products
  • Medical services
  • Shared service arrangements in circumstances in which two or more organizations (whether businesses or otherwise) with exempt and/or nonbusiness activities join together on a cooperative basis to form a separate, independent entity (a cost-sharing group), to supply themselves with certain services at cost (the VAT cost-sharing exemption applies only in very specific circumstances and does not cover all shared-service arrangements)

Reduced rate: 5%

  • Fuel and power supplied to domestic users and charities
  • Installations of energy-saving materials in residential buildings where the cost of the materials does not exceed 60% of the total cost of installation (where the 60% threshold is exceeded, only the labor cost element qualifies for the reduced rate); installations of energy saving materials in residential accommodation for recipients who are aged 60 or over or receiving certain benefits, for housing associations and where the residential accommodation is a building or part of a building used solely for a “relevant residential purpose.” The reduced rate does not apply to the installation of wind turbines and water turbines Building materials for certain residential conversions
  • Sanitary protection products
  • Children’s car seats
  • Smoking cessation products
  • Grant-funded installation of heating appliances and qualifying security goods
  • Certain larger holiday caravans
  • Small, cable-based passenger transport systems

Reduced rate: 12,5%

  • Between October 1, 2021 and March 31, 2022, the VAT rate will be 12.5% on tourism & hospitalty expenses

A global VAT/GST rate overview can be found here (note this is a work in progress).

This post was last updated on May 3, 2021.

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