VAT calculator UK
Add VAT to a price, take it off a total, or work backwards from a VAT-inclusive figure. Shows net, VAT and gross together at 20%, 5% or zero-rated.
Taking VAT off means dividing
This is the sum people get wrong, and it is worth being blunt about, because it ends up on real invoices.
A receipt says £100 including VAT. Take 20% off and you get £80. But add 20% back onto £80 and you land on £96, not £100. So £80 was never the price before VAT.
VAT is charged on turnover, so it changes what you invoice without touching what you owe on your profit. Wagepage's self-employed tax calculator covers the income tax and National Insurance side.
The sum that works divides instead: £100 ÷ 1.2 = £83.33. Add 20% to £83.33 and you are back at £100 exactly, which is the check that proves it.
Why the two disagree. The 20% was charged on the smaller number, so taking 20% off the bigger number takes off too much. The VAT on £100 gross is £16.67, not £20. If you invoice off the wrong figure you are £3.33 out on every hundred pounds, and it compounds across a year.
The one-sixth shortcut
At 20%, the VAT inside a gross price is exactly one sixth of it. £120 including VAT holds £20 of VAT. £60 holds £10. £300 holds £50.
The reason is short: VAT is 20 parts on top of 100, so the total is 120 parts and the VAT is 20 of them. 20/120 is 1/6. It is the fastest way to sanity-check a receipt without a calculator, and it only works at 20%.
The three rates
- 20% standard. Most goods and services. It has been 20% since 4 January 2011.
- 5% reduced. Home energy, children's car seats, some energy-saving materials.
- 0% zero-rated. Most food, children's clothes, books and newspapers.
Zero-rated and exempt are different things, and the difference matters if you run a business. Zero-rated sales are taxable at 0%, so they count towards your turnover and you can still reclaim the VAT you paid on your own costs. Exempt sales (postage stamps, insurance, most financial services) sit outside VAT altogether, and you cannot reclaim against them.
When you have to register
You must register once your taxable turnover passes £90,000 in any rolling 12 months. Rolling means any 12 months, not your accounting year, so it can creep up on you mid-year. You also have to register if you expect to pass it in the next 30 days alone.
You can register voluntarily below the threshold, which suits you if your customers are VAT-registered businesses and you have VAT on costs to reclaim. It suits you less if you sell to the public, because your prices effectively rise by 20% overnight.
Coming back off the register
The threshold to leave is £88,000, and the £2,000 gap below the £90,000 registration line is deliberate. Without it, a business hovering around the threshold would register and deregister every few months.
You can ask HMRC to cancel your registration once your taxable turnover falls below £88,000, measured VAT-exclusive, or if you can show it will fall below in the next 12 months. That second route needs credible evidence: forecasts, trends, something more than an intention.
One catch worth knowing. HMRC will refuse if the drop comes from you planning to stop trading, or to suspend taxable supplies for 30 days or more. Deregistration is for businesses that have genuinely shrunk, not for pausing.
Reclaiming the VAT on what you buy
Registering means charging VAT on what you sell. It also means reclaiming the VAT on what you buy. The two net off, and the difference is what you actually hand over.
How a quarter actually works. You invoice £40,000 plus VAT, so you collect £8,000 of output VAT. You spend £12,000 plus VAT on stock, software and fuel, paying £2,400 of input VAT. You owe HMRC £5,600, being £8,000 minus £2,400. If input ever exceeds output, HMRC repays you, which is why businesses buying heavily before they sell often reclaim in early quarters.
You need a valid VAT invoice to reclaim, and you cannot reclaim on everything. Business entertainment is blocked, and most cars are blocked outright unless the vehicle is genuinely unavailable for private use. Anything used partly for personal purposes has to be apportioned to the business share.
The Flat Rate Scheme, and the trap in it
If your turnover is £150,000 or less excluding VAT, you can join the Flat Rate Scheme. You still charge customers the normal 20%, but you pay HMRC a single flat percentage of your gross takings and stop reclaiming input VAT on most purchases. It exists to cut paperwork.
The percentage depends on your trade, and there is a 1% discount for your first year of VAT registration.
The limited cost business trap. If you spend less than 2% of turnover on goods, or less than £1,000 a year when your goods spend is above 2%, you are a "limited cost business" and your rate is 16.5% whatever your trade. That is 16.5% of your gross, and gross already includes the VAT you charged. On £100,000 of sales you collect £20,000 of VAT and hand over £19,800 of it. Consultants, developers and anyone selling time rather than things usually land here, and the scheme costs them money.
Goods means physical items used in the business. It excludes fuel for a car you also drive privately, capital items, food and drink, and anything you buy to resell or hire out. Those exclusions are what push service businesses over the line.
What has to be on a VAT invoice
Your customer cannot reclaim without a valid invoice, so getting this wrong creates work for both of you. A full VAT invoice needs a unique sequential number, your business name, address and VAT number, the date, the customer's name and address, a description of what you supplied, the rate and amount for each item, the total excluding VAT, the VAT amount, and the total including VAT.
Under £250 including VAT, a simplified invoice is enough: your name, address and VAT number, the date, a description, the VAT rate, and the total including VAT. You do not have to show the VAT separately, which is why a petrol receipt still counts.
Common questions
How do I work out VAT?
To add it, multiply by 1.2 at the standard 20% rate: £100 becomes £120. To take it off a VAT-inclusive total, divide by 1.2: £100 becomes £83.33. Or put the figure in above and it shows net, VAT and gross together.
How do I remove VAT from a price?
Divide by 1.2, do not take 20% off. £100 including VAT is £83.33 before VAT, because £83.33 plus 20% comes back to £100. Taking 20% off would give £80, and £80 plus 20% is only £96, so it cannot be right.
What is reverse VAT?
Working backwards from a total that already includes VAT to find the price before VAT and the VAT itself. It is what you need when you have a receipt showing one figure and have to split it for your books. Pick "Remove VAT" above.
How much is VAT in the UK?
The standard rate is 20% and has been since 4 January 2011. A reduced rate of 5% applies to things like home energy and children's car seats, and a zero rate applies to most food, children's clothes and books.
How much VAT is in a gross price?
At 20%, exactly one sixth of it. £120 including VAT contains £20 of VAT, because VAT is 20 parts added to 100, making 120, and 20 out of 120 is a sixth. The shortcut only works at the 20% rate.
What is the VAT registration threshold?
£90,000 of taxable turnover in any rolling 12 month period. Rolling means any 12 months rather than your accounting year, so check it as you go. You must also register if you expect to pass £90,000 in the next 30 days on its own.
What is the difference between zero-rated and exempt?
Zero-rated sales are taxable, just at 0%, so they count towards your turnover and you can reclaim VAT on your costs. Exempt sales, like insurance and postage stamps, sit outside VAT and carry no right to reclaim.
What is the VAT deregistration threshold?
£88,000 of taxable turnover, measured VAT-exclusive. The £2,000 gap below the £90,000 registration threshold is deliberate, so a business hovering near the line does not register and deregister repeatedly. HMRC will refuse if the drop is because you plan to stop trading or suspend supplies for 30 days or more.
Can I claim VAT back on everything I buy?
No. You need a valid VAT invoice, and some things are blocked outright: business entertainment, and most cars unless the vehicle is genuinely unavailable for private use. Anything used partly for personal purposes has to be apportioned down to the business share.
Is the VAT Flat Rate Scheme worth it?
It depends what you spend on goods. If you spend less than 2% of turnover on goods, or under £1,000 a year, you are a limited cost business and pay 16.5% of your gross takings whatever your trade. On £100,000 of sales you would collect £20,000 of VAT and hand over £19,800 of it. Service businesses usually lose money on it; businesses buying physical stock often do not.
What has to be on a VAT invoice?
A unique sequential number, your name, address and VAT number, the date, the customer's name and address, a description, the rate and amount per item, the total excluding VAT, the VAT amount, and the total including VAT. Under £250 including VAT a simplified invoice is enough, which is why a petrol receipt still lets you reclaim.