Stepwise.

VAT Calculator

Add or remove UK VAT at 20%, 5% or 0%, with the net, VAT and gross amounts shown separately and the correct divisor for working backwards.

How to use this calculator

  1. 1Enter the amount you have.
  2. 2Say whether it already includes VAT or not — this is the part people get wrong.
  3. 3Choose the rate: 20% standard, 5% reduced for things like domestic fuel, or 0% for most food, books and children's clothing.
  4. 4Use the divisor shown when working backwards by hand.

How the calculation works

Gross = net × (1 + rate). Net = gross ÷ (1 + rate). VAT = gross − net
net
The price before VAT
gross
The price the customer pays, VAT included

Working backwards means dividing, not subtracting. Taking 20% off a £120 gross figure gives £96, which is wrong — the correct net is £120 ÷ 1.2 = £100. The 20% was charged on the £100, not on the £120.

A useful shortcut for the standard rate: the VAT in a gross figure is one sixth of it, because 20/120 simplifies to 1/6.

Zero-rated is not the same as exempt. Zero-rated supplies carry VAT at 0% and the business can still reclaim input VAT; exempt supplies carry none and input VAT generally cannot be reclaimed.

Worked example

Adding VAT to £1,000

  1. 1.Net is £1,000.
  2. 2.VAT at 20% is £1,000 × 0.20 = £200.
  3. 3.Gross is £1,200.

Result: £1,200 gross, including £200 of VAT

Removing VAT from £1,200

  1. 1.Divide by 1.2, do not subtract 20%: £1,200 ÷ 1.2 = £1,000 net.
  2. 2.VAT is £1,200 − £1,000 = £200.
  3. 3.Subtracting 20% instead would give £960 — wrong by £40, because the 20% was charged on the net figure.

Result: £1,000 net and £200 of VAT

The mistake almost everyone makes

Adding VAT is straightforward: multiply by 1.2 for the standard rate. Removing it is where the errors happen, because the instinct is to subtract 20%.

That is wrong, and consistently wrong in the same direction. A gross price of £120 contains £20 of VAT, not £24. The 20% was calculated on the £100 net figure, so recovering it means dividing the gross by 1.2 rather than taking a fifth off. Subtracting 20% from £120 gives £96 — understating the net by £4 and the VAT by the same.

For the standard rate there is a shortcut worth remembering: the VAT inside a gross figure is exactly one sixth of it, since 20/120 reduces to 1/6. On £120 that is £20 immediately.

The three rates, and the fourth category

The UK has three VAT rates and one further category that behaves differently.

  • Standard, 20% — the default for most goods and services.
  • Reduced, 5% — domestic fuel and power, children's car seats, some energy-saving materials and certain mobility aids.
  • Zero, 0% — most food, books and newspapers, children's clothing and footwear, and public transport. VAT is charged, at a rate of nothing.
  • Exempt — insurance, postage stamps, most financial services and some education and health. Not the same as zero-rated: exempt supplies fall outside the VAT system, and a business making them generally cannot reclaim the VAT on its own costs.

When registration becomes compulsory

A business must register for VAT once taxable turnover exceeds £90,000 in any rolling twelve-month period — not a tax year, which is a common misreading. It is a moving window, so the test has to be applied continuously rather than checked annually.

Registration can also be voluntary below the threshold, and often makes sense for a business selling mainly to other VAT-registered businesses: input VAT on costs becomes reclaimable while customers reclaim the VAT charged, so it is a net benefit. For a business selling to consumers the opposite applies — registration effectively raises prices by 20% or cuts margin by the same, which is why many deliberately manage turnover to stay below the threshold.

What this assumes, and where it stops

Assumptions

  • UK VAT rates as they have stood since January 2011.
  • The amount entered is a single supply at one rate.
  • Figures are rounded to the penny at each step.

Limitations

  • Exempt supplies are not the same as zero-rated and are not modelled here.
  • The flat rate scheme, cash accounting and margin schemes all change the amount actually paid to HMRC.
  • Northern Ireland follows different rules for goods moving to and from the EU.
  • Which rate applies to a specific product can be genuinely difficult; check the HMRC guidance for borderline cases.

Common questions

How do I work out VAT from a gross price?

Divide by 1.2 for the standard rate, do not subtract 20%. A £120 gross price is £100 net plus £20 of VAT — subtracting 20% would wrongly give £96. A quicker route for the 20% rate: the VAT inside a gross figure is exactly one sixth of it, since 20/120 simplifies to 1/6.

What are the UK VAT rates?

20% standard on most goods and services, 5% reduced on things like domestic fuel and children's car seats, and 0% on most food, books, newspapers and children's clothing. A separate category, exempt, covers insurance, postage and most financial services — that is not the same as zero-rated, because a business making exempt supplies generally cannot reclaim VAT on its own costs.

When do I have to register for VAT?

Once taxable turnover exceeds £90,000 in any rolling twelve-month period. That is a moving window rather than a tax year, so it needs checking continuously. You can also register voluntarily below the threshold, which usually helps a business selling to other VAT-registered businesses and usually hurts one selling to consumers, since it effectively adds 20% to prices or takes it out of margin.

Sources

Formula and content last reviewed on .

Results are estimates for information only, not professional advice.

Report an error

Related calculators

Tools people commonly use alongside the vat calculator.

See all finance calculators →