Add or remove VAT instantly at any rate. See your net, VAT and gross amounts with a clear breakdown — plus mental maths shortcuts for quick calculations.
VAT (Value Added Tax) is a consumption tax added to most goods and services sold in the UK. The standard rate is 20% and applies to most products and services. The reduced rate is 5% and applies to domestic energy, children's car seats, and some health products. A zero rate (0%) applies to most food, children's clothing, books, and public transport. To add VAT: multiply the net price by 1.20 (for 20%). To remove VAT from a gross price: divide by 1.20. For example, a net price of £100 becomes £120 including VAT. A gross price of £120 has a net price of £100 and VAT of £20. Businesses must register for VAT once their taxable turnover exceeds £90,000 in any 12-month period.
| Net (ex-VAT) | VAT (20%) | Gross (inc-VAT) |
|---|---|---|
| £50 | £10 | £60 |
| £100 | £20 | £120 |
| £250 | £50 | £300 |
| £500 | £100 | £600 |
| £750 | £150 | £900 |
| £1,000 | £200 | £1,200 |
| £2,500 | £500 | £3,000 |
| £5,000 | £1,000 | £6,000 |
| £10,000 | £2,000 | £12,000 |
VAT (Value Added Tax) is collected at each stage of the supply chain but ultimately paid by the end consumer. Here's how the calculation works, what the different rates apply to, and what businesses need to know about registration and reclaiming.
VAT is expressed as a percentage of the net (ex-VAT) price. Adding or removing it uses slightly different calculations — a common source of errors.
Multiply the net price by (1 + VAT rate). For 20%: net × 1.2. For 5%: net × 1.05. The result is the gross (VAT-inclusive) price. The VAT amount is gross minus net.
Divide the gross price by (1 + VAT rate). For 20%: gross ÷ 1.2. For 5%: gross ÷ 1.05. Do NOT just take 20% off the gross — this is wrong and gives a different answer.
The reason: VAT is 20% of the net, not 20% of the gross. On a £120 gross price, the VAT is 1/6 of £120 = £20, not 20% of £120 = £24. This is why the ÷ 6 shortcut works for standard rate.
The UK has three positive VAT rates plus the exempt category. Understanding which applies is important for both businesses and consumers.
Applies to most goods and services not in another category. Includes most clothing (adults), electronics, professional services, restaurant meals, alcohol, and most retail goods.
Domestic fuel and power, children's car seats, mobility aids for older people, renovating empty properties, and some energy-saving materials. Has expanded in scope over recent years.
Most food and soft drinks, children's clothing and footwear, books, newspapers, public transport, prescription medicines, and most exports. VAT-registered sellers can still reclaim VAT on inputs.
Financial services, insurance, education, health services, burial/cremation, and residential property rental. Different from zero-rated — businesses making exempt supplies cannot reclaim VAT on their costs.
VAT registration is mandatory once you cross the threshold — and voluntary registration can be beneficial even below it.
You must register if your taxable turnover exceeds £90,000 in any rolling 12-month period. Register within 30 days of exceeding the threshold. Failure to register on time incurs penalties.
You can register voluntarily below £90,000. Benefit: you can reclaim VAT on business purchases. Downside: you must charge VAT to customers, which may make you uncompetitive if they're non-VAT-registered consumers.
Once registered, you must: charge VAT on taxable supplies, submit VAT returns (usually quarterly via Making Tax Digital), pay any VAT owed to HMRC, keep VAT records for at least 6 years, and display your VAT registration number on invoices.