Both live under Settings → Tax & categories, which only admins can change. Every team member can pick from them on quotes and library items.
Tax rates
Tax rates are named rates applied to each line, such as "VAT 20%" or "Zero rated". Tax is worked out per line, rounded to 2 decimals, then added up.
- Choose New tax rate.
- Enter a Name and the Rate % (up to four decimals).
- Tick Default for new items if new items should use it.
- Choose Create tax rate.
To change a rate, choose Edit and then Save changes (but see below for rates already used). Use Set as default to change the default later.
Why you can't change a rate that's been used
Quotes keep a snapshot of the rate they were written with. Changing a rate's percentage once a quote item or a library item uses it would silently rewrite history, so it isn't allowed. When a rate changes, Archive the old one and create a new one. Archived rates are no longer offered on new items, and existing quotes are unaffected. Tick Show archived to see them and use Restore if needed. A rate that has never been used is deleted rather than archived.
Sales categories
Sales categories group your items, for example "Design", "Development" and "Hosting". Each can have:
- a Description;
- a Default tax rate, applied when you choose the category on a library item;
- an Accounting code, used as the account code on Xero invoice lines (otherwise the default sales account from the Xero settings is used);
- Default for new items.
Create one with New category and Create category; change one with Edit and Save changes. Archiving a category hides it from pickers; items keep their category. As with tax rates, a category that has never been used is deleted instead.
New organisations
A new organisation starts with one default tax rate: VAT at 20% when the base currency is pounds sterling, otherwise a "No tax" rate at 0%. Edit or add to it before you start quoting.
Last updated 19 October 2026