VAT Calculator UK

How to Add VAT to a Price

Adding VAT to a net (ex-VAT) price is straightforward. Multiply the net amount by the relevant VAT multiplier:

• Standard Rate (20%): Net × 1.20
  Example: £500 × 1.20 = £600 gross (£100 VAT)
• Reduced Rate (5%): Net × 1.05
  Example: £500 × 1.05 = £525 gross (£25 VAT)

The VAT amount on its own is simply the difference between the gross and net figures.

How to Remove VAT from a Gross Price (Reverse VAT)

This is where a lot of people go wrong. You cannot simply subtract 20% from a gross price to find the net, that gives the wrong answer.

Here's why: VAT is calculated on the net amount, not the gross. At 20%, the VAT embedded in a gross price is always one sixth of the gross, not one fifth.

• Standard Rate (20%): Gross ÷ 1.20 = Net
  Example: £600 ÷ 1.20 = £500 net
  To find just the VAT element: Gross ÷ 6
  Example: £600 ÷ 6 = £100 VAT
• Reduced Rate (5%): Gross ÷ 1.05 = Net

Our calculator handles both directions instantly, just select Add VAT or Remove VAT and enter your figure.

UK VAT Rates 2025/26

HMRC currently operates three active VAT rates plus an exempt category:

The standard rate of 20% has been in place since 4 January 2011, when it was increased from 17.5%.

Zero-Rated vs VAT Exempt

This is one of the most commonly misunderstood areas of UK VAT, and it matters significantly if you run a business.

Zero-rated goods and services are technically inside the VAT system, the rate just happens to be 0%. Because they are taxable supplies, a VAT-registered business selling zero-rated goods can still reclaim the VAT it paid on its own business costs (input VAT).

Exempt goods and services are completely outside the VAT system. If your business only makes exempt supplies, such as insurance or certain healthcare services, you cannot register for VAT and therefore cannot reclaim any input VAT on your purchases.

For mixed businesses that make both taxable and exempt supplies, partial exemption rules apply. This gets complicated quickly and is worth discussing with an accountant.

Do You Need to Register for VAT?

You must register your business for VAT with HMRC when your taxable turnover exceeds £90,000 in any rolling 12-month period. This is not a calendar year or tax year, HMRC looks at any consecutive 12-month window.

Once you cross the threshold, you have 30 days to notify HMRC and register. Your registration takes effect from the beginning of the month following the breach. Failing to register on time can result in penalties calculated as a percentage of the VAT owed from the date you should have registered.

A few important points worth knowing:

• Zero-rated sales count towards the threshold. Even though no VAT is charged, zero-rated supplies are still taxable turnover and must be included in your rolling total.
• You can register voluntarily even if your turnover is below £90,000. This makes sense if you sell primarily to other VAT-registered businesses (who can reclaim the VAT you charge) or if you want to reclaim input VAT on significant business purchases.
• The deregistration threshold is £88,000. If your taxable turnover drops below this, you can apply to deregister.

Making Tax Digital (MTD) & VAT

All VAT-registered businesses in the UK, regardless of turnover, are required to comply with Making Tax Digital for VAT. This means:

• Keeping digital records of all VAT transactions (no paper-only records), submitting quarterly VAT returns using HMRC-approved MTD-compatible software, and maintaining a continuous digital link between your records and your VAT return, no manual re-keying of figures.

Compatible software includes Xero, QuickBooks, Sage, and FreeAgent. HMRC maintains an up-to-date list of approved providers on their website. If you are approaching the £90,000 threshold, getting MTD-ready accounting software in place before you register makes the transition significantly smoother.

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