This guide sets out the different rates of VAT and directs you to an online calculator to simplify working out VAT. It tells you which goods and services are exempt and which are outside the scope of VAT.

If you need further guidance, call the HM Revenue & Customs National Advice Service on Tel 0845 010 9000.

Rates of VAT and how to calculate them

There are three rates of VAT:

• A standard rate, currently 17.5 per cent. This is the rate at which most businesses should add VAT to products and services that they sell.
• A reduced rate, currently 5 per cent. Some products and services have a lower rate of VAT, eg domestic fuel, energy-saving installations or the renovation of dwellings.
• A zero rate. Many products and services are given a zero rating, eg some foods, books and children's clothing. A zero rating for a product or service is not the same as a total exemption - see the page in this guide on goods or services exempt from VAT.

You can view a list of the areas of business where sales are reduced-rated or zero-rated on the HM Revenue & Customs website. If you are at all unsure you should call the HM Revenue & Customs National Advice Service Enquiry Line on Tel 0845 010 9000.

You can calculate how much VAT you should charge your customers using an online VAT calculator on the TaxCentral website. The calculator also enables you to work out the VAT element of a total price.

Goods or services exempt from VAT

Certain goods and services are exempt from VAT, meaning that no VAT is charged on them. Examples include insurance, some services from doctors and dentists, and some types of education and training.

You can view a list of the areas of business where you should check if your sales are exempt from VAT on the HM Revenue & Customs website. If you are at all unsure you should call the HM Revenue & Customs National Advice Service Enquiry Line on Tel 0845 010 9000.

The crucial difference between exempt goods and services and zero-rated ones is that if you supply exempt goods or services, your right to claim back the VAT on your purchases may be restricted. However, businesses that supply zero-rated products or services can still reclaim the VAT they've paid on purchases.

Goods or services outside the scope of VAT

Some goods or services don't form any part of the VAT system and these are known as being outside the scope of VAT.

Generally, goods and services are outside the scope of VAT if:

• they're supplied by someone who isn't, and doesn't need to be, VAT registered
• they're supplied outside the UK and Isle of Man
• they're not supplied in the course of your business