Quickly add or remove UK VAT from any amount. Works with the standard 20% rate, reduced 5% rate and zero rate. Shows the net amount, VAT amount and gross total. Essential for self-employed workers, freelancers and small businesses.
VAT (Value Added Tax) is charged by VAT-registered businesses in the UK on most goods and services. There are three rates:
Businesses must register for VAT when their taxable turnover exceeds £90,000 in any 12-month period (2026/27 threshold). Once registered, you must charge VAT on your sales and can reclaim VAT on your business purchases.
If you have a VAT-inclusive price and want to find out how much VAT is included, select "Remove VAT from gross amount." For example, if a price including 20% VAT is £120, the net price is £100 and the VAT is £20.
You must register for VAT within 30 days when your taxable turnover exceeds £90,000 in any rolling 12-month period, or when you expect to exceed it in the next 30 days alone. Taxable turnover includes all VAT-rated sales (standard, reduced, and zero-rated) but excludes VAT-exempt sales like insurance, education, and medical services. Failing to register on time results in penalties plus backdated VAT owed. However, you can voluntarily register below the threshold if it makes business sense. Voluntary registration benefits businesses making significant VATable purchases as you can reclaim input VAT even if your sales are below threshold — if you buy £20,000 of stock containing £4,000 VAT but sell £60,000, registering lets you reclaim that £4,000. It also appears more professional and credible to business customers expecting VAT invoices. However, voluntary registration means administrative burden (quarterly returns, record-keeping), charging VAT adds 20% to your prices which may price you out versus unregistered competitors when selling to consumers, and you're locked in for 12 months minimum. If most customers are VAT-registered businesses they reclaim the VAT anyway so it's neutral; if selling to consumers the 20% price increase significantly impacts competitiveness. Deregistering is allowed when turnover falls below £88,000 and you expect it to stay there, but requires repaying VAT claimed on remaining stock and assets. Some businesses deliberately stay just under £90,000 threshold to avoid registration, occasionally refusing additional work to prevent crossing the threshold — this VAT threshold trap arguably constrains growth for small businesses.
Both mean customers pay no VAT but they're fundamentally different for VAT-registered businesses. Zero-rated items (most food, children's clothes, books, newspapers, prescription medicines, public transport, new builds up to £325,000) charge 0% VAT, meaning customers pay no VAT but the seller can reclaim input VAT on purchases used to produce those sales. A baker selling bread charges 0% VAT but reclaims VAT on flour, ovens, and packaging. Exempt items (insurance, finance, education, health services, residential property rent, charity fundraising) have no VAT charged and sellers cannot reclaim input VAT on related purchases. An insurance broker charges no VAT and can't reclaim VAT on computers and office rent attributable to insurance sales. This matters enormously: zero-rating benefits businesses economically whilst exemption creates unrecoverable VAT costs. If most or all your sales are exempt, registering for VAT may be impossible or pointless as you can't reclaim input VAT. Businesses with mixed exempt and taxable supplies face complex partial exemption calculations to determine how much input VAT is reclaimable. Understanding this distinction helps businesses price correctly and determine whether VAT registration makes sense. Zero-rating is used to make essential items affordable for consumers while not disadvantaging businesses; exemption exists for services deemed socially beneficial but creates VAT recovery problems for providers. Some businesses structure operations to maximize zero-rated sales and minimize exempt sales to optimize VAT recovery.
To remove VAT from a gross price, divide by 1.20 (for 20% VAT), not subtract 20% which is mathematically wrong. £120 ÷ 1.20 = £100 net, £20 VAT. The common mistake is £120 - 20% = £96, which is incorrect. The formula: Net = Gross ÷ 1.20, VAT = Gross - Net. For 5% VAT use ÷ 1.05. To add VAT: Gross = Net × 1.20. Spreadsheets and accounting software handle this automatically but manual calculations require the correct formula. Rounding matters more than you'd think for VAT compliance. HMRC rules state VAT must be rounded down to the nearest penny on each invoice line, then the total VAT rounded to nearest penny. Invoice software handles this automatically but manual invoices need care. For £3.99 at 20%, VAT is £0.665 which rounds to £0.66 (down), giving gross £4.65. If you incorrectly rounded VAT to £0.67 you'd overcharge. For your VAT return, you round total sales and purchases to nearest pound but individual VAT amounts must be calculated and rounded per transaction according to HMRC rules. Getting rounding wrong across thousands of transactions can result in discrepancies between your records and VAT owed, potentially triggering queries or penalties. Most businesses use accounting software specifically to avoid manual rounding errors. When quoting prices, be clear whether VAT-inclusive or exclusive — B2B quotes are typically ex-VAT while consumer quotes must be VAT-inclusive. Under Consumer Protection regulations, consumer-facing prices must include VAT unless the business exclusively trades B2B.
Net amount: £250. VAT at 20%: £250 × 0.20 = £50. Gross amount: £250 + £50 = £300. Alternatively: £250 × 1.20 = £300. This is the calculation when creating invoices or setting prices for products where you know your desired net revenue and need to add VAT for the customer.
Gross amount: £480. Net amount: £480 ÷ 1.20 = £400. VAT amount: £480 - £400 = £80. This calculation is needed when you see a VAT-inclusive price and want to know how much VAT it contains, such as when checking expenses you can reclaim or verifying supplier invoices.
Buying home energy bill showing £210 including VAT at 5%. Net amount: £210 ÷ 1.05 = £200. VAT amount: £210 - £200 = £10. If this is a business expense for office heating, the business can reclaim the £10 VAT on their VAT return, effectively paying only £200 for the energy.
Keep immaculate records distinguishing VATable purchases from non-VATable expenses like client entertaining, non-business purchases, or items for exempt sales. Photograph receipts immediately as thermal paper fades, potentially disallowing future VAT reclaims during audits. Submit VAT returns on time (quarterly deadlines strictly enforced) as late filing incurs automatic £400+ penalties even if no VAT owed. Use Making Tax Digital compliant software from April 2026 as manual spreadsheets and paper records no longer meet HMRC requirements for most VAT-registered businesses. Consider the Flat Rate Scheme if turnover is below £150,000 — you charge customers full VAT but pay HMRC a fixed lower percentage of turnover, often resulting in VAT savings plus simpler administration, though you cannot reclaim input VAT except on capital assets over £2,000. Cash accounting allows accounting for VAT when paid rather than invoiced, improving cashflow for businesses with slow-paying customers, but only available for turnover below £1.35m. For retailers, use retail schemes designed for businesses selling to consumers where tracking individual transactions is impractical. Separate business and personal expenses scrupulously as personal items aren't VAT-reclaimable even if accidentally mixed in business accounts. Charge VAT on deposits and prepayments when received, not when services are delivered, which can create timing complications. For international transactions, understand when to charge VAT (generally UK sales to UK customers), when reverse charge applies (B2B services), and when zero-rating applies (goods exported outside UK). Keep VAT certificates from major capital purchases as you may need to repay VAT if assets are sold or used personally within time limits. Finally, use this calculator when pricing to ensure you're charging correct VAT and understanding your actual revenue after VAT is paid to HMRC.