The current UK VAT rate is 20%. That is the standard rate, and it applies to most goods and services. There are two other rates: a reduced rate of 5%, for example on children's car seats and home energy, and a zero rate of 0% on most food, children's clothes, books and public transport. The standard rate has been 20% since 4 January 2011, when it rose from 17.5%. One temporary change is live now. From 1 October 2026 to 31 March 2027, domestic electricity in Great Britain is zero-rated.
UK VAT rates in 2026
| Rate | % | Typical examples |
|---|---|---|
| Standard | 20% | Most goods and services, including restaurant meals, hot takeaway food, alcohol, adult clothing, professional services and software |
| Reduced | 5% | Domestic gas and heating fuel, children's car seats, mobility aids for older people |
| Zero | 0% | Most food, children's clothes and footwear, books and newspapers, passenger transport in vehicles with 10 or more seats |
| Exempt | No VAT | Insurance, most financial services, health services by registered practitioners, education by eligible bodies, Royal Mail postal services |
HMRC's rates of VAT on different goods and services is the definitive list. It runs to hundreds of entries, and the boundaries between them generate most VAT disputes. Our article on VAT on crisps shows how fine those lines can be.
Zero-rated and exempt are not the same
Both mean the customer pays no VAT, but the effect on the seller is very different.
- Zero-rated supplies are taxable supplies at 0%. They count towards the £90,000 registration threshold, and the seller can reclaim the VAT on its costs. A business making only zero-rated sales usually receives repayments from HMRC;
- Exempt supplies are outside the VAT charge. They do not count towards the threshold, and VAT on the related costs generally cannot be reclaimed. That irrecoverable VAT is a real cost to insurers, banks, landlords of residential property and many charities;
- Mixed businesses, which make both taxable and exempt supplies, have to apportion their input VAT under the partial exemption rules.
Temporary changes in 2026 and 2027
Three time-limited measures affect the rates in force this winter:
- Domestic electricity: 0% in Great Britain, 1 October 2026 to 31 March 2027. This is made by the Value Added Tax (Supplies of Domestic Electricity) Order 2026, SI 2026/987, and explained in Revenue and Customs Brief 10 (2026). It covers electricity supplied for domestic use or for a charity's non-business use. In Northern Ireland the 5% reduced rate continues. Gas and other fuels are not affected and stay at 5%;
- Energy-saving materials: 0% until 31 March 2027. This covers installing items such as insulation, solar panels and heat pumps in homes. HMRC's guidance says the rate reverts to 5% from 1 April 2027;
- Children's meals and family attractions: 5% from 25 June to 1 September 2026. This reduced rate has now ended. It still matters for returns and credit notes covering that window. The detail is in our guide to the 2026 VAT cuts.
Where the rates are set in law
The rates come from the Value Added Tax Act 1994, and knowing which part of the Act applies is how disputes about liability are settled:
- Standard rate. Section 2(1) charges VAT "at the rate of 20 per cent" on supplies and imports. The Treasury can vary the rate by order, but only by up to 25% of the existing rate, and such an order lapses after a year unless renewed;
- Reduced rate. Section 29A charges 5% on supplies listed in Schedule 7A. The Treasury can add to, remove from or modify that list by order. The 2026 reduced rate for children's meals and family attractions was made this way, by SI 2026/576;
- Zero rate. Schedule 8 lists zero-rated supplies in groups, such as food in Group 1 and transport in Group 8. Each group has its own items, exceptions and notes, and the exceptions do much of the work;
- Exemption. Schedule 9 lists exempt supplies, such as land, insurance, finance, education and health.
Where HMRC guidance and the Act appear to differ, the Act prevails. Case law on the meaning of words such as "food", "catering" or "confectionery" fills the gaps.
How to work out VAT at 20%
The arithmetic is simple. The common mistake is applying the wrong method.
- Adding VAT to a net price. Multiply by 1.2. A £500 fee becomes £600, of which £100 is VAT;
- Finding the VAT in a gross price. Divide by 6. This is the "VAT fraction" of 20/120. A £600 VAT-inclusive price contains £100 of VAT. Taking 20% of £600 gives £120, which is wrong;
- At 5%. Multiply a net price by 1.05. To extract VAT from a gross price, divide by 21.
The figures above are illustrations of the arithmetic, not HMRC examples.
Which rate applies to your sales
The rate depends on what is supplied, not who supplies it, and HMRC looks at the substance of the supply. A few principles settle most questions:
- Single or multiple supply. A package sold for one price may be one supply at one rate, or several supplies that must be split. Getting this wrong is a common source of assessments;
- Time of supply. When a rate changes, as it did for electricity on 1 October, the rate depends on when the supply is treated as made. For bills that straddle the change, HMRC lets suppliers decide the liability by the date the energy is consumed, and recommends using meter readings to apportion;
- Place of supply. Services to overseas business customers are often outside the scope of UK VAT altogether. The rate question only arises once the supply is in the UK;
- Northern Ireland. Do not assume a GB rate change applies there. The electricity zero rate is a current example: NI supplies stay at 5%.
Charging 20% where 0% applied makes your prices uncompetitive. Charging 0% where 20% applied means the VAT comes out of your margin, plus interest and possibly penalties. Our VAT health check reviews the liability of what you sell, and our VAT team advises on new products, mixed supplies and the effect of rate changes.