Tax rate
Tax rate is the percentage used to work out how much tax you pay on a taxable amount. You multiply the taxable base (for example, the price of goods or your profit) by the rate to get the tax due.
Practical tip
Always confirm which rate applies before you invoice or file a return. Using the wrong rate can lead to back‑payments or corrections.
In the UK, the applicable rate depends on the tax. For VAT, different rates can apply to different goods and services; some supplies are zero‑rated, while others are exempt (exempt supplies generally do not allow VAT recovery). For income and company taxes, rates can be banded, so only the slice of income in a band is taxed at that band’s rate; your overall (effective) rate is the average across all slices.
Typical UK contexts where a tax rate applies:
- VAT: standard, reduced and zero rates exist for different supplies; some supplies are exempt. Charge the correct rate on invoices and keep evidence for why you used it.
- Income tax and National Insurance: banded rates create a marginal rate (on the next pound) and an effective rate (overall average).
- Corporation tax: company profits are taxed at set rates; reliefs and allowances can change your effective rate.
