VAT exempt or zero-rated​?

VAT exempt or zero‑rated?

The UK standard rate of VAT is 20%. Some goods and services are charged at the reduced rate of 5%, and others are not charged VAT at all. These are described as zero‑rated or exempt. Exempt is not the same as zero‑rated: although VAT is not added in either case, they mean different things.

What’s the difference between exempt and zero‑rated?

An exempt supply means the goods or services are not subject to VAT. A zero‑rated supply means the goods or services are taxable for VAT at 0%. As explained by gov.uk ¹:

Exempt items are different from zero‑rated supplies. In both cases VAT is not added to the selling price, but zero‑rated goods or services are taxable for VAT — at 0%.

In practical terms, input tax on purchases related to zero‑rated supplies can generally be recovered, whereas input tax related to exempt supplies cannot.

Examples of exempt items

• Insurance and reinsurance transactions
• Education and vocational training provided by an eligible body (other than a private school)
• Public postal services provided by Royal Mail under a universal service obligation
• Parking — the grant or licence to occupy land on which incidental parking takes place
• Care or medical treatment provided by a qualifying institution such as a hospital, hospice or nursing home

Examples of zero‑rated items

• Water supplied to households
• Books and printed publications
• Babywear

You can check VAT rates for different goods and services on www.gov.uk ². If you’re unsure, speak to a qualified accountant.

However, if you’re not VAT‑registered, VAT does not apply to your sales. when invoicing in our form,, simply select ‘No VAT’.