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VAT Calculator UK

Quickly add or remove VAT from any amount. Supports the standard 20% rate, 5% reduced rate, zero rate, and custom VAT rates.

How VAT Works in the UK

Value Added Tax (VAT) is a consumption tax charged on most goods and services sold in the United Kingdom. VAT is collected at each stage of the supply chain, from manufacturer to retailer, but the cost is ultimately borne by the end consumer. Businesses registered for VAT act as collection agents for HMRC, charging VAT on their sales (output tax) and reclaiming VAT on their purchases (input tax).

VAT was introduced in the UK on 1 April 1973, replacing the previous Purchase Tax. The standard rate has changed several times over the years, from the initial 10% to the current 20%, which has been in effect since 4 January 2011. Understanding VAT is essential for businesses and consumers alike, as it affects the price of almost everything you buy.

UK VAT Rates for 2025

There are three rates of VAT in the UK, plus exemptions for certain goods and services:

RatePercentageApplies To
Standard Rate20%Most goods and services
Reduced Rate5%Domestic energy, child car seats, some renovations
Zero Rate0%Most food, children's clothing, books, public transport
ExemptN/AFinancial services, education, health, insurance

The standard rate of 20% applies to the vast majority of goods and services. If you are unsure which rate applies to a particular item, HMRC provides a detailed list of VAT rates for goods and services on their website.

How to Calculate VAT

Calculating VAT involves two common operations: adding VAT to a net price and removing VAT from a gross price. The formulas are straightforward but differ depending on the direction.

Adding VAT to a Net Amount

To add VAT to a net (ex-VAT) price, multiply by the VAT rate as a decimal and add to the original amount. Alternatively, multiply the net amount by 1 plus the rate:

  • Standard rate (20%): Net amount x 1.20 = Gross amount
  • Reduced rate (5%): Net amount x 1.05 = Gross amount

For example, if a product costs £500 before VAT at the standard rate: £500 x 1.20 = £600 including VAT. The VAT amount is £100.

Removing VAT from a Gross Amount

To remove VAT from a gross (VAT-inclusive) price, divide by 1 plus the VAT rate:

  • Standard rate (20%): Gross amount / 1.20 = Net amount
  • Reduced rate (5%): Gross amount / 1.05 = Net amount

For example, if a receipt shows £600 including VAT at 20%: £600 / 1.20 = £500 net. The VAT amount is £100. Note that you cannot simply subtract 20% from £600 (which would give £480) — this is a very common mistake.

VAT Registration Threshold

As of April 2024, the VAT registration threshold in the UK is £90,000. This means that if your business's taxable turnover exceeds £90,000 over any rolling 12-month period, you are legally required to register for VAT with HMRC. You must also register if you expect your turnover to exceed £90,000 in the next 30 days alone.

Once registered, you must charge VAT on your taxable sales, submit VAT returns (usually quarterly), and pay the VAT you owe to HMRC. You can reclaim VAT on eligible business purchases, which is a significant benefit for many businesses. The VAT deregistration threshold is £88,000 — if your turnover drops below this level, you can apply to deregister.

Voluntary registration is possible even if your turnover is below £90,000. This can be beneficial if your customers are VAT-registered businesses (who can reclaim the VAT you charge) or if you make significant purchases on which you want to reclaim VAT. However, voluntary registration means you must comply with all VAT obligations including filing returns and keeping appropriate records.

Worked Examples

Example 1: Adding VAT to a Freelance Invoice

A freelance web designer charges £2,000 for a project. They are VAT-registered and need to add standard rate VAT:

  • Net amount: £2,000.00
  • VAT at 20%: £2,000.00 x 0.20 = £400.00
  • Gross amount: £2,000.00 + £400.00 = £2,400.00

The invoice total is £2,400.00, of which £400.00 is VAT that must be reported to HMRC on the next VAT return.

Example 2: Finding the VAT on a Receipt

A business buys office supplies for £359.99 including VAT. To find the VAT element:

  • Gross amount: £359.99
  • Net amount: £359.99 / 1.20 = £300.00 (rounded)
  • VAT amount: £359.99 - £300.00 = £59.99

The business can reclaim £59.99 as input VAT on their next VAT return, provided they have a valid VAT receipt.

Example 3: Reduced Rate on Home Energy

A household receives a gas bill of £157.50 including VAT at the 5% reduced rate:

  • Gross amount: £157.50
  • Net amount: £157.50 / 1.05 = £150.00
  • VAT amount: £157.50 - £150.00 = £7.50

VAT Flat Rate Scheme

The VAT Flat Rate Scheme is a simplified method for small businesses to calculate their VAT payments. Instead of tracking input and output VAT on every transaction, businesses pay a fixed percentage of their gross turnover (including VAT) to HMRC. The percentage varies by industry, typically ranging from 4% to 16.5%.

To be eligible, your VAT-taxable turnover must be £150,000 or less (excluding VAT) in the next 12 months. The main advantage is reduced paperwork, but the scheme may not be beneficial if you have significant input VAT to reclaim. From April 2017, "limited cost traders" — businesses whose goods purchases are less than 2% of turnover or less than £1,000 per year — must use a flat rate of 16.5%, which reduces the benefit of the scheme for many service businesses.

Common Mistakes When Calculating VAT

1. Subtracting the VAT Percentage from the Gross Price

The most common VAT calculation error is subtracting 20% from a VAT-inclusive price to find the net amount. For example, taking 20% off £120 gives £96, not the correct £100. You must divide by 1.20, not multiply by 0.80. This is because VAT is calculated on the net price, not the gross price.

2. Applying the Wrong VAT Rate

Not all goods and services are subject to the standard 20% rate. Common items with different rates include: children's car seats (5%), domestic energy (5%), sanitary products (0% from January 2021), and most food (0%). Applying the standard rate to these items will give incorrect calculations.

3. Forgetting That Some Items Are Exempt

VAT-exempt items include postage stamps, financial and property transactions, education and training, insurance, and betting. Exempt items are different from zero-rated items — businesses selling only exempt goods generally cannot register for or reclaim VAT.

4. Not Keeping Proper VAT Records

To reclaim input VAT, businesses must hold a valid VAT invoice showing the supplier's VAT number, the date, the net amount, the VAT amount, and the gross total. Till receipts for amounts under £250 are acceptable as simplified VAT invoices, but for larger amounts, a full VAT invoice is required.

Frequently Asked Questions

What is the current UK VAT rate?
The standard UK VAT rate is 20%. This applies to most goods and services. There is also a reduced rate of 5% for certain items such as domestic energy, children's car seats, and some home renovations. A zero rate (0%) applies to essentials like most food, children's clothing, books, and newspapers. Some goods and services are VAT exempt, meaning no VAT is charged at all.
How do I add VAT to a price?
To add VAT to a net price, multiply the amount by the VAT rate as a decimal and add it to the original price. For the standard 20% rate: multiply by 1.20. For example, £100 excluding VAT becomes £100 x 1.20 = £120 including VAT. The VAT element is £20. For the 5% reduced rate, multiply by 1.05.
How do I remove VAT from a price?
To remove VAT from a gross (VAT-inclusive) price, divide by 1 plus the VAT rate as a decimal. For the standard 20% rate: divide by 1.20. For example, £120 including VAT divided by 1.20 = £100 net. The VAT element is £20. A common mistake is to simply subtract 20% from the gross price, which gives an incorrect result (£120 minus 20% = £96, which is wrong).
What is the VAT registration threshold in the UK?
The VAT registration threshold in the UK is £90,000 (from April 2024). If your taxable turnover exceeds this amount over any rolling 12-month period, or you expect it to exceed this threshold in the next 30 days alone, you must register for VAT with HMRC. You can also register voluntarily below this threshold if it benefits your business, for example to reclaim VAT on purchases.
What goods and services have reduced or zero VAT?
The 5% reduced rate applies to domestic fuel and power, installation of energy-saving materials, children's car seats, and certain residential renovations. The zero rate (0%) applies to most food and drink (but not meals in restaurants, hot takeaways, or confectionery), children's clothing and footwear, books and newspapers, public transport, and prescription medicines. Some items are VAT exempt, including financial services, education, health services, and insurance.
What is the difference between zero-rated and VAT exempt?
Zero-rated goods are technically subject to VAT but at a rate of 0%, meaning no VAT is charged to the customer. However, businesses selling zero-rated goods can still reclaim VAT on their purchases (input VAT). VAT-exempt goods are not subject to VAT at all, and businesses selling only exempt goods cannot register for VAT or reclaim input VAT. This distinction matters for businesses because it affects their ability to recover VAT on costs.
Do I need to charge VAT on exports?
Exports of goods from the UK to non-UK customers are generally zero-rated for VAT purposes, provided you have evidence of export (such as shipping documentation). Services supplied to overseas businesses are generally outside the scope of UK VAT under the place of supply rules. However, the rules vary depending on the type of service and the location of the customer. If in doubt, check the HMRC guidance or consult a tax adviser.

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