What percentage is classified as reduced rate VAT?

The percentage classified as reduced rate VAT is 5%. This reduced rate applies to certain goods and services that are considered essential or beneficial to society. Examples include domestic fuel and power, children's car seats, and certain types of accommodations, among others.

The 5% rate is aimed at providing some relief in terms of tax burden for essential items, making them more affordable for consumers. In contrast, the standard rate for VAT is typically higher, and therefore the reduced rate serves a specific purpose in the taxation policy by targeting specific sectors that warrant a diminished tax rate.

This distinction is crucial for businesses and consumers as it affects pricing, compliance, and the overall tax strategy within the indirect tax landscape. Other rates mentioned, such as 0%, 10%, and 15%, do not align with the classification for reduced rate VAT, with 0% generally being reserved for zero-rated supplies and the others typically being associated with different classifications of VAT, none of which are categorized as reduced rates.