The three UK VAT rates
The UK standard rate is 20% and covers most goods and services. A reduced rate of 5% applies to things like home energy and child car seats. Many essentials — most food, children's clothes, books — are zero-rated at 0%, which is different from being exempt.
Example at 20%
A sofa costs £800 before VAT. Gross = 800 × 1.20 = £960, including £160 VAT. From a £960 price tag: 960 ÷ 1.20 = £800 net.
Example at 5%
A £200 energy bill before VAT becomes 200 × 1.05 = £210. Backwards: 210 ÷ 1.05 = £200 net, so the VAT is £10.
Zero-rated vs exempt
Zero-rated (0%) still counts as taxable turnover, so a business can reclaim input VAT. Exempt supplies, like insurance or finance, do not allow VAT recovery. The calculation is trivial — multiply by 1.00 — but the paperwork difference matters.