What are VATable sales?
Definition of VATable sales
VATable sales are sales that your business will have to charge VAT on if it is registered for VAT.
There are different rates of VAT in operation in the UK. Most sales are subject to VAT at the standard rate, which is currently 20%. Some sales are subject to VAT at the reduced rate of 5%. Still others are zero-rated - which means they are subject to VAT but at 0%. All these three types of sales are VATable sales.
Then there are sales which are exempt from UK VAT, and others which are outside the scope of UK VAT altogether. These are not VATable sales.
Examples of different VAT rates and what they apply to:
- The reduced rate applies to quasi-essential goods and services, like domestic heating, or mobility aids for the elderly.
- Most passenger transport, like air fares and train fares, is zero-rated for VAT.
- Services provided by post offices are exempt from VAT, so when you buy stamps, they will be exempt.
- Taxes and tolls imposed by the government, such as MOT certification fees, are outside the scope of VAT.
Find out more about the different rates of VAT in our dedicated guide.
You can use our simple VAT calculator to add or remove VAT at the standard or reduced rate.
Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.
Frequently Asked Questions
What is the difference between zero-rated and exempt in VAT? Why does it matter?
Zero-rated sales are still VATable - just the rate of UK VAT on them is 0%. Exempt sales are not VATable. If you make zero-rated sales, you can reclaim the VAT on the costs you’ve incurred to make those sales - but if you make exempt sales, you can’t reclaim the VAT on the costs you’ve incurred to make those sales. For example, a dispensing doctor’s surgery could reclaim VAT on the costs that relate to the pharmacy, but not to the surgery, because the dispensing of prescriptions is zero-rated while the provision of health services by a doctor is exempt.