Zero Rate VAT
A 0% VAT rate applied to certain essential goods and services, including most food, children's clothing, books, and prescribed medicines. Unlike exempt supplies, zero-rated supplies still count as taxable, meaning businesses making zero-rated sales can register for VAT and reclaim input VAT on their purchases. This distinction from VAT exemption is important for businesses that mix zero-rated and standard-rated supplies.
Related Terms
Value Added Tax
A consumption tax charged at each stage of production and distribution on goods and services, with the final burden falling on the end consumer.
Standard Rate VAT
The main VAT rate of 20% applied to most goods and services sold in the UK by VAT-registered businesses.
Reduced Rate VAT
A 5% VAT rate applied to certain goods and services deemed essential or beneficial, including domestic fuel and power, children's car seats, and some energy-saving materials.
VAT Registration Threshold
The level of taxable turnover above which businesses must register for VAT, currently £90,000 per rolling 12-month period.
Try the calculator
Use our free tool to see how zero rate vat affects your tax.