VAT rate – What is a VAT rate?

The VAT rate refers to the amount of VAT that’s placed on a product or service.

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The VAT rate is given as a percentage and must be recorded on a VAT invoice.

Different VAT rates in the UK

In the UK, different VAT rates may apply to a product or service, depending on what it is. There are 3 types of VAT rate: the standard rate, the reduced rate, and the zero rate. There are also products and services that are exempt from VAT.

Standard VAT

At the moment, the standard rate of VAT charged on products and services in the UK is 20%. This means that if a product is priced at £100 and the VAT rate on this item is 20%, the consumer will pay £120 to the merchant. The business therefore keeps £100 and remits £20 to the government.

Reduced VAT rate

A reduced VAT rate is charged on specific items, for example, sanitary products, energy-saving measures and children’s car seats. 

The reduced VAT rate on these items is currently 5%. A purchase of £52.50 bought at a reduced VAT rate would therefore mean the seller receives £50 and the government receives £2.50 in VAT.

Zero VAT rate

There’s also a zero rate. As the name suggests, these items are charged at 0%. 

The zero rate is applied to life necessities. Included in this category are things like most food, books, newspapers, medical equipment, prescription medications and children’s clothes. It’s important to remember that even though there’s no VAT charged on these items, you still have to record them on your VAT return.

VAT exempt

There are also some things that are exempt from VAT. Things like postage stamps fit within this category. By being exempt from VAT, they’re also charged at 0%, but because they’re exempt and not zero-rated, these things do not need to be recorded in your VAT return and are not counted in your taxable turnover.

Applying a VAT rate to an invoice with SumUp Invoices

When you create an invoice with SumUp Invoices, the system will automatically apply the appropriate VAT rate. This will normally be 20% when you are invoicing a customer in the UK. Using the drop-down menu under ‘VAT’, you’re then able to edit this if your invoice is for something where the standard VAT rate doesn’t apply, for example, medical equipment.