How do VAT rates work?
What are the rules for VAT in the UK?
Business sales, like goods and services, require VAT charges. In the U.K., almost all commercial businesses are required to charge VAT, maintain a VAT administration and report to HMSC. Usually once every three months, you report VAT returns with accounting of charged VAT minus VAT that has been charged to your business. You can only charge VAT if your business is registered for VAT. Different rules apply to entities like registered charities.
Which VAT rate applies ?
Books, newspapers, children's clothing and shoes are VAT-exempt. Curiously enough, so are motorcycle helmets and insurance. Food and drink items (for human consumption) are zero-rated, so are sports education and publicly accessible cultural activities.
Reduced VAT rate
U.K. domestic fuel or power, or children's car seats are always charged at the reduced VAT rate of 5%.
Standard VAT rate
For practically all goods and services that are not specifically zero-rated or rated for reduced VAT, the standard VAT rate applies. This includes alcoholic beverages, catering, hot takeaway meals, wellness massages and services from barbers or haircare specialists.