Struggling to understand UK VAT rates in 2025? You’re not alone. For small business owners, freelancers, and even seasoned accountants, navigating VAT can be confusing. With different VAT rates for items like children’s clothes, home energy, and digital services, it’s easy to make mistakes that lead to lost claims or HMRC penalties.
This guide simplifies UK VAT rules for 2025/26, including rates, thresholds, reclaim rules, and real-world examples, all supported by a category-wise VAT rate table. Let’s make VAT easy!
Current UK VAT Rates for 2025/26
Standard Rate (20%):
- Applies to most goods and services.
- Examples: electronics, clothing, and professional services.
Reduced Rate (5%):
- Applies to certain goods and services deemed beneficial for social policy.
- Examples: children’s car seats, domestic fuel and power.
Zero Rate (0%):
- Applies to specific goods and services to reduce the cost of living.
- Examples: most food items, children’s clothing, books, newspapers, and public transport.
Don’t let VAT confusion slow you down! Use our VAT calculator to quickly and accurately determine the right VAT amount for your purchases or sales — whether it’s electronics, fuel, or books etc.
Category-Wise UK VAT Rates 2025
Use this table to quickly understand how VAT applies across different product and service categories in the UK.
| Category | VAT Rate | Examples |
|---|---|---|
| General Goods & Services | 20% (Standard) | Electronics, furniture, adult clothing, consultancy services |
| Home Energy & Utilities | 5% (Reduced) | Gas, electricity, heating oil for domestic use |
| Children’s Products | 0% (Zero) | Children’s clothing, children’s footwear, and car seats |
| Food & Drink (Basic items) | 0% (Zero) | Bread, milk, fruits, vegetables, cereals |
| Food & Drink (Prepared) | 20% (Standard) | Takeaway food, restaurant meals, and snacks |
| Books & Publications | 0% (Zero) | Physical books, newspapers, journals, leaflets |
| Health & Medical Supplies | 0% / 5% | Prescriptions (0%), mobility aids for the elderly (5%) |
| Public Transport | 0% (Zero) | Bus fares, train tickets, domestic flights (economy) |
| Hotels & Holiday Accommodation | 20% (Standard) | Hotel rooms, serviced apartments |
| Water Supply | 0% / 5% | Domestic water (0%), sewerage, and certain services (5%) |
| Education Services | 0% (Zero) | School fees, university education, and eligible training services |
| Cultural Events | 0% / Exempt | Museum visits, theatre performances (may vary if subsidised or not) |
| Financial & Insurance Services | Exempt | Bank fees, insurance premiums, and loan interest |
| Postal Services (Public) | Exempt | Royal Mail services at public tariff |
| Charity Shop Sales | 0% (Zero) / Exempt | Donated goods sold by registered charities |
Read: VAT rates on different goods and services
VAT Registration Threshold for 2025
- Threshold: £90,000 annual VAT-taxable turnover
- Mandatory Registration: If your business crosses this limit in any rolling 12-month period
- Voluntary Registration: Allowed even if you’re under the threshold (useful for reclaiming input VAT)
Read more: How to Register for VAT in the UK
How to Pay Your VAT Bill
Paying your VAT bill on time is essential to stay compliant with HMRC and avoid penalties.
| Payment Method | Processing Time |
|---|---|
| Online/Telephone Banking (Faster Payments) | Same or next day |
| CHAPS | Same or next day |
| Bacs | 3 working days |
| Debit Card | 3 working days |
| Business Credit Card (1.5% fee) | 3 working days |
| Direct Debit | 3 working days |
| Standing Order | 3 working days |
| At Bank/Building Society | 3 working days |
History
| Year | Standard VAT Rate (%) | Reduced VAT Rate(s) (%) |
|---|---|---|
| 1973 | 10 | – |
| 1979 | 15 | – |
| 1991 | 17.5 | 5 |
| 2008 | 15 | 5 |
| 2010 | 20 | 5 |
| 2025 | 20 | 5 |