VAT rates

How VAT rates are set up and used in Accounting. There are five pre-set VAT rates to choose from. Simply choose the appropriate VAT rate for your transaction.

When the VAT rates change or a new VAT rate is required, we will create and maintain the rates for you.

Available VAT rates

Standard 20%

F or standard rated transactions, such as

  • Catering services

  • Alcoholic drinks

  • Confectionery

  • Crisps and savoury snacks

  • Hot food

  • Sports drinks

  • Ice cream

  • Soft drinks and mineral water

  • Electricity - businesses (in some cases 5%). Gas - businesses (in some cases 5%).

  • eBay seller fees

Lower Rate 2 12.5%

VAT rate change for hospitality and tourism sector from 1st October. For transaction, such as

  • Food

  • Non-alcoholic drinks

  • Accommodation

  • Admission to attractions

Lower Rate 5%

For lower rated transactions, such as

  • Mobility aids for the elderly
  • Smoking cessation products - nicotine patches and gum
  • Insulation
  • Radiators
  • Electricity - charity, domestic and residential
  • Gas - charity, domestic and residential

Zero Rated 0%

For zero-rated transactions, such as

  • Mobility aids for the elderly
  • Smoking cessation products - nicotine patches and gum
  • Insulation.
  • Radiators
  • Electricity - charity, domestic and residential
  • Gas - charity, domestic and residential

Exempt

For transactions exempt from VAT. The net amount still appears on your VAT Return.

  • Some land and building sales
  • Some finance charges
  • Education and some training
  • Health
  • Betting and gaming
  • Burials and cremation
  • Postal services
  • Insurance

No VAT

For transactions not involving VAT. These don’t appear on your VAT Return

  • Wages
  • Bank or cash transfers
  • PAYE and NI contribution
  • Capital
  • Loans, dividends and gifts of money

Custom VAT rates

You cannot create your own custom VAT rates.

If you are using a sub-scheme for VAT, where the VAT is calculated differently to the Standard 20%, then you need to

  1. Select the Standard rate

  2. Amend the VAT value on the transaction to the correct amount.

VAT rates and the VAT return

This table shows which boxes on the VAT Return are affected by these rates:

VAT rate Sale or purchase Net or VAT Box
Standard Sale Net Box 6
VAT Box 1
Purchase Net Box 7
VAT Box 4
Lower Rate Sale Net Box 6
VAT Box 1
Purchase Net Box 7
VAT Box 4
Zero Rated Sale Net Box 6
VAT N/A
Purchase Net Box 7
VAT N/A
Exempt Sale Net Box 6
VAT N/A
Purchase Net Box 7
VAT N/A
No VAT Non-vatable rate. The transaction doesn’t appear on the VAT Return.

If you purchase goods or services from VAT registered suppliers in the EU, the following also applies:

  • Reverse charge VAT - The VAT element of purchases of standard or lower rated services appear in Boxes 1 and 4 and the net in 6 and 7.
  • Notional VAT - The VAT element of purchases of standard-rated goods appear in Boxes 2 and 4 and net in 7 and 9.

Change the VAT rate on a

Each holds a default VAT rate to save you from having to select the correct rate each time you use it. It's simple to change the default.

Note: Changing the default rate won't make any change to existing transactions. They'll remain with the rates set at the time of their creation.

  1. Select Settings, then Business Settings, then Chart of Accounts.
  2. Use the search to find the to change.
  3. Select the required .
  4. Choose the VAT rate to use from the VAT Rate drop-down.