How to add VAT
To add VAT to a price that does not include it (the net price), multiply by the VAT rate and add the result. At 20%, that is the same as multiplying by 1.2.
Gross = Net × (1 + rate). For example, £250 + 20% VAT = £250 × 1.2 = £300, of which £50 is VAT.
How to remove VAT (reverse VAT)
A common mistake is to take 20% off a VAT-inclusive price. That gives the wrong answer, because the 20% was worked out on the smaller, net amount. To find the net price, divide by 1 plus the rate instead:
Net = Gross ÷ (1 + rate), and VAT = Gross − Net.
Worked example: a receipt shows £120 including VAT at 20%.
- Net price: £120 ÷ 1.2 = £100
- VAT included: £120 − £100 = £20 (that is one sixth of the total)
- Taking 20% off £120 would wrongly give £96.
A quick rule: at 20%, the VAT inside any VAT-inclusive price is one sixth of it. At 5%, it is one twenty-first.
UK VAT rates
- Standard rate – 20%: most goods and services.
- Reduced rate – 5%: some goods and services, such as children's car seats and home energy.
- Zero rate – 0%: for example most food and children's clothes. Zero-rated is not the same as exempt: a VAT-registered business still records zero-rated sales on its VAT return.
Which rate applies depends on exactly what is sold, and some items have special rules. HMRC's guidance on VAT rates on different goods and services lists them.
Rounding
The calculator rounds to the nearest penny. On a VAT invoice you can round the total VAT for the invoice, or work out VAT line by line; HMRC accepts either if you are consistent, so totals across many lines can differ by a penny or two.
Do I need to register for VAT?
A UK business must register when its VATable turnover goes over the registration threshold in a rolling 12-month period (check the current figure on GOV.UK), and may register voluntarily below it. Once registered you charge VAT on your sales, reclaim the VAT on business costs and file VAT returns, usually every quarter through Making Tax Digital software.