Default tax rates in Xero

The most commonly used tax rates are already set up in Xero. You can edit most of them, and add your own custom rates.

About default tax rates

  • The default list of rates is based on standard UK VAT rates.
  • The Accounts using this Tax Rate column refers to the accounts in your chart of accounts that will use this rate by default when you select the account on a transaction. You don't have to use the default tax rate on a transaction. You can change it to another rate on your invoice, bill or other transaction.
  • You can add your own tax rates and apply them as the default for accounts in your chart of accounts.
  • You can edit most of the default rates. Pay particular attention to the tax type, as this determines how these rates are reported. Contact your accountant or bookkeeper if you're unsure how to set up your tax rates.
  • If you're using the flat rate VAT scheme and you've specified this in your financial settings, you don't need to set up any new tax rates. Xero updates the default chart of accounts to use the right flat tax rates.
  • The tax treatment and tax rate you select on a transaction determine where the transaction is reported on the VAT Return. Review this information before editing default rates or creating new rates.
  • If you're using the flat rate scheme there are special VAT rates for capital purchases or sales and these can only be used with asset accounts (specified by 'account type' in the chart of accounts). You can't choose these special rates on a transaction if you're using other account types.

Default tax rates

NameTax Rate
20% (VAT on Expenses)20%
20% (VAT on Income)20%
5% (VAT on Expenses)5%
5% (VAT on Income)5%
EC Acquisitions (20%)0%
EC Acquisitions (Zero Rated)0%
Exempt Expenses0%
Exempt Income0%
No VAT0%
Reverse Charge Expenses (20%)0%
VAT on Imports0%
Zero Rated EC Goods Income0%
Zero Rated EC Services0%
Zero Rated Expenses0%
Zero Rated Income0%

You'll have these additional default rates if you use the flat rate VAT scheme:

NameTax Rate
20% VAT on Capital Sales20%
20% VAT on Capital Purchases20%

You might also be interested in