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About UK VAT
Value Added Tax (VAT) is a consumption tax levied on most goods and services sold in the United Kingdom. It is collected by businesses on behalf of HM Revenue and Customs (HMRC) and applies at every stage of the supply chain, from manufacturer to retailer. The standard VAT rate in the UK is 20%, though certain items qualify for a reduced rate of 5% or are zero-rated at 0%. Businesses with a taxable turnover above the VAT registration threshold (currently £90,000 per year) must register for VAT, charge it on their sales, and submit regular VAT returns. Whether you are a business owner preparing invoices, a freelancer quoting prices to clients, an accountant checking figures, or a consumer wanting to see the pre-tax price of a purchase, our free VAT calculator makes it simple to add or remove VAT from any amount. Results update as you type, and you can switch between standard, reduced, zero, and custom VAT rates instantly.
How to Use the VAT Calculator
- Choose your mode — click "Add VAT" if you have a net (ex-VAT) price and want to find the gross total, or click "Remove VAT" if you have a gross (inc-VAT) price and want to find the net amount.
- Enter the amount — type the price in pounds. Results update automatically as you type, so you can see the calculation change in real time.
- Select the VAT rate — choose 20% Standard, 5% Reduced, 0% Zero, or Custom. If you select Custom, an additional field appears where you can enter any percentage.
- Read the result — the calculator displays three figures: the net price (ex-VAT), the VAT amount, and the gross price (inc-VAT).
- Copy the result — click "Copy Result" to copy all three figures to your clipboard for pasting into invoices, spreadsheets, or emails.
How VAT Calculation Works
Adding VAT is straightforward multiplication. To add 20% VAT to a net price, you multiply by 1.20 (which is 1 plus 0.20). For example, £100 multiplied by 1.20 equals £120, of which £20 is the VAT portion. Removing VAT is where many people make a common mistake. You cannot simply subtract 20% from the gross price, because 20% of £120 is £24, which would give an incorrect net figure of £96. Instead, you must divide by 1.20. Dividing £120 by 1.20 gives the correct net price of £100. This is because the VAT was originally calculated as a percentage of the net amount, not the gross amount. The same principle applies to the 5% reduced rate: multiply by 1.05 to add, divide by 1.05 to remove. Our calculator handles all of this automatically, including custom rates, so you never need to remember the formula.
What is the current UK standard VAT rate?
The standard VAT rate in the UK is 20%. This rate has been in effect since January 2011 and applies to the majority of goods and services sold in the UK. It is charged on everything from electronics and furniture to restaurant meals and professional services, unless the item qualifies for a reduced or zero rate.
How do I add 20% VAT to a price?
Multiply the net (ex-VAT) amount by 1.20. For example, if your net price is £100, then £100 multiplied by 1.20 equals £120. The £20 difference is the VAT amount. This works because 1.20 represents the original amount (1.00) plus the VAT fraction (0.20). The same logic applies to other rates: multiply by 1.05 for 5% VAT.
How do I remove VAT from a gross price?
Divide the gross (inc-VAT) amount by 1.20 for standard rate VAT. For example, £120 divided by 1.20 equals £100 net, with £20 being the VAT portion. A common mistake is to subtract 20% from the gross price, but this gives the wrong answer because 20% of £120 is £24, not £20. Always divide rather than subtract when removing VAT.
What is the reduced VAT rate and what does it apply to?
The reduced VAT rate is 5% and applies to a specific list of goods and services including domestic fuel and power (gas and electricity for home use), children's car seats, certain energy-saving materials installed in homes, and some types of building renovation work. If you are unsure whether an item qualifies, check the HMRC guidance on reduced-rate supplies.
What goods are zero-rated for VAT?
Zero-rated goods are technically subject to VAT but at a rate of 0%, meaning no VAT is charged to the consumer. Common zero-rated items include most food and drink (excluding restaurant meals, hot takeaways, and confectionery), children's clothing and footwear, books and newspapers, public transport, and prescription medicines. Businesses selling zero-rated goods can still reclaim VAT on their own purchases.
What is the VAT registration threshold?
As of 2025/26, businesses must register for VAT if their taxable turnover exceeds £90,000 in any rolling 12-month period, or if they expect it to exceed that threshold in the next 30 days alone. Once registered, the business must charge VAT on all applicable sales, submit quarterly VAT returns, and pay any VAT owed to HMRC. Voluntary registration is possible below this threshold, which can be beneficial for reclaiming input VAT.
Why is subtracting 20% not the same as removing VAT?
When you add 20% VAT, the VAT is calculated as 20% of the net (smaller) amount. So if the net is £100, the VAT is £20 and the gross is £120. If you then subtract 20% of £120, you get £24, which is too much because you are calculating 20% of the larger gross amount. The correct method is always to divide by 1.20, which reverses the original multiplication and gives you the true net figure.
Is the UK VAT rate changing in 2026?
No. The standard rate remains 20% for 2026 — it has been unchanged since January 2011. The reduced rate (5%) and zero rate also remain unchanged. Rate changes are announced in the Budget, and no change is planned for the 2026/27 fiscal year.
Do I charge VAT to customers outside the UK?
It depends on what and where. For B2B services to any overseas business, you usually don't charge UK VAT — the customer accounts for it via reverse charge. For B2C goods exported outside the UK, they are zero-rated. For B2C digital services to the EU, you must register for OSS and charge the customer's country VAT rate.
When do I have to register for VAT?
When your taxable turnover exceeds £90,000 in any rolling 12-month period, or when you expect it to exceed that threshold in the next 30 days. You can register voluntarily below the threshold, which lets you reclaim input VAT on business purchases — useful if you sell zero-rated goods or to B2B customers.
Is VAT the same as sales tax?
No. Sales tax (used in the US) is charged only at the final point of sale to consumers. VAT is charged at every stage of the supply chain but businesses reclaim what they paid on purchases, so the ultimate burden falls on the end consumer. The mechanisms differ but the consumer-side outcome is similar.
Worked Example: Invoicing a £1,200 Job with 20% VAT
Say you're a sole-trader plumber, VAT-registered, and you've just finished a boiler installation for a domestic customer. Your labour and parts total £1,200 net. Here's exactly what ends up on the invoice and what reaches HMRC.
VAT at 20% on £1,200 is £240. Your invoice total is therefore £1,440 — broken down as £1,200 net + £240 VAT. The customer pays you £1,440. You hold the £240 on behalf of HMRC until your next quarterly VAT return. If the same customer had been a VAT-registered business, they'd reclaim that £240 as input VAT on their own return, so the ultimate cost to them is still £1,200.
If you remove VAT from a £1,440 inclusive quote instead, divide by 1.20 — not subtract 20%. £1,440 ÷ 1.20 = £1,200 net, £240 VAT. Subtracting 20% of £1,440 gives £1,152, which is wrong by £48 and a common error on hand-written quotes.
Common Scenarios
Flat-Rate Scheme vs standard VAT. If your taxable turnover is under £150,000, HMRC's Flat Rate Scheme (FRS) lets you pay a fixed percentage of gross turnover (e.g. 12% for accountants, 14.5% for IT consultancy) instead of the usual calculation. You still charge 20% on invoices but keep the difference. For a service business with few costs it's usually a win; for anything with high material purchases, standard VAT is better because you can reclaim input VAT.
EU imports post-Brexit. Since 1 January 2021, goods imported from the EU are treated as imports for VAT purposes. You pay import VAT at the border (or via postponed VAT accounting on the return), then reclaim it if you're VAT-registered. Services from EU suppliers use the reverse-charge mechanism — the UK recipient self-accounts for VAT, paying and reclaiming on the same return.
Digital services to EU consumers. UK businesses selling digital services (downloads, SaaS, e-books) to EU consumers must register for the Non-Union OSS scheme or pay VAT at each country's rate. For B2B digital services, the reverse charge applies — no UK VAT, the EU business customer handles it.
Zero-rated vs exempt. Zero-rated goods (kids' clothes, most food, books) have 0% VAT but you can still reclaim input VAT. Exempt goods (financial services, education) have no VAT at all but you can't reclaim. Partially exempt businesses use complex apportionment rules.
Historical UK VAT Rates (1973–2026)
The UK introduced VAT on 1 April 1973 at 10%, replacing Purchase Tax. Rates have moved with successive budgets:
| Date | Standard Rate | Notes |
|---|---|---|
| 1 Apr 1973 | 10% | VAT introduced |
| 29 Jul 1974 | 8% | Wilson government |
| 18 Jun 1979 | 15% | Thatcher — unified rate |
| 1 Apr 1991 | 17.5% | Major government |
| 1 Dec 2008 | 15% | Financial crisis cut |
| 1 Jan 2010 | 17.5% | Temporary cut ended |
| 4 Jan 2011 | 20% | Osborne — still current |
The 5% reduced rate was introduced in 1997 (domestic fuel). The registration threshold has risen from £15,000 in 1977 to £90,000 as of April 2024.
Common Mistakes
The single most common VAT error on hand-typed invoices is subtracting 20% from a gross price to "remove VAT" — the maths is wrong because you're taking a percentage of the wrong base. Always divide by 1.20. Another frequent slip is forgetting that the registration threshold is measured on a rolling 12-month basis, not the calendar or financial year; many small businesses realise too late that a busy quarter pushed them over £90,000 three months earlier and incur backdated VAT. Digital services sold to overseas customers are often invoiced at the wrong VAT rate because the place-of-supply rules differ for B2B and B2C — a mistake that only surfaces during an HMRC inspection or when the customer refuses to pay tax they shouldn't have been charged. Finally, businesses on the Flat Rate Scheme sometimes reclaim input VAT they're not entitled to claim; outside a handful of categories (capital assets over £2,000, pre-registration expenses), FRS users can't reclaim input VAT at all.
