VAT - Difference between zero rated and exempt items

This is not a definitive list. For more details of goods or services that don't appear in these lists or you're unsure which tax code to use, please visit https://www.gov.uk/guidance/rates-of-vat-on-different-goods-and-services or contact HMRC.

Zero rated items

Goods on which the Government charge VAT but the rate is currently set to zero. The goods covered by this classification are items such as children's clothes and footwear, water, basic foods, books and newspapers.

Exempt items

Tax code: T2

Goods on which no VAT is paid or charged, but which still need to be recorded on the VAT Return. The goods covered by this classification are items such as land, postal services, health services, betting and gaming.

Non-vatable items / outside of scope

Tax code: T9

Items which are outside the scope of VAT. These items do not need to be included on your VAT Return. For example, year end journals, salary journals, bank transfers etc.

 TIP: Refer to the following article for a list of default tax codes in your software >

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