What UK VAT Rates Apply to My Small Business?

There are 3 rates of VAT in the UK. Standard Rate 20%, Reduced Rate 5% and Zero-Rate 0%. The rate that applies to your products depends on the type of goods you sell.
Most goods and services fall within the standard rate of VAT regardless of where and how you sell them. There are some exceptions however which I'd like to summarise here but the VAT regulations in the UK are so convoluted and long that you're better off going directly to the HMRC VAT Rates page here instead. There are some easy-to-categorise exceptions however, which I'll try to list here for you.

Standard Rate:
Standard Rate applies to pretty much everything and you should charge this rate unless the goods or services are classed as reduced or zero-rated.

Reduced Rate:
Reduced Rate VAT kicks in depending on what the item is as well as the circumstances of the sale. HMRC cite the following two examples as when you should apply the reduced rate of 5% to sales but they are not exhaustive:

  •    Children’s car seats and domestic fuel or power are always charged at 5%
  •    Mobility aids for older people are only charged at 5% if they’re for someone over 60 and the goods are installed in their home

The full list of reduced rate items can only be deduced by seeking the advice of a VAT specialist or by doing your own research at the HMRC VAT Rates page and I'd encourage anyone thinking of going into business on eBay or Amazon to view these regulations.

Zero Rated:
Zero-Rated means that the goods are still VAT-taxable but the rate of VAT you must charge your customers is 0%. You still have to record them in your VAT accounts and report them on your VAT Return. Examples include:

  •    Books and newspapers
  •     Children’s clothes and shoes
  •    Motorcycle helmets
  •    Most goods you export to non-EU countries
  •    Goods you supply to a VAT registered EU business - you can check if the VAT number is valid

Again, the list is not exhaustive and VAT regulations in the UK are always changing.

For a quick answer to your VAT questions, you're probably far better off using use a VAT Calculator like this one to work out the rates you need to pay than to try and figure it out yourself!