VAT Calculator

How it works

VAT (Value Added Tax) is a consumption tax applied to most goods and services in the UK. The standard rate is 20%, with a reduced rate of 5% for items such as domestic energy and children's car seats.

Adding VAT

Removing VAT

To remove VAT you divide by the VAT multiplier rather than subtracting the percentage directly. A common mistake is to subtract 20% of the gross price, which gives the wrong net figure because 20% of the gross is larger than the VAT on the net.

Why this works: Adding 20% VAT multiplies the net price by 1.20 to produce the gross. Reversing this means dividing the gross by 1.20, not subtracting 20% of the gross. Because 20% of a higher gross figure is a larger amount than 20% of the lower net figure, the shortcut of subtracting 20% will always give you the wrong answer.

Related calculations

Use it whenever you need to add VAT to a quote, remove VAT from a receipt, or check the VAT element on an invoice. For sale prices and percentage discounts, you can find the discounted price after a reduction. To find the net figure from any VAT-inclusive total manually, you can also work backwards from a gross amount to the original net. For business pricing decisions, our profit margin calculator helps you check the margin on each sale.

How VAT works in the UK

VAT is charged on most goods and services sold in the UK. Businesses with a taxable turnover above the VAT registration threshold (£90,000 for the 2024/25 tax year) must register with HMRC and charge VAT to their customers. Registered businesses can also reclaim the VAT they pay on business purchases, meaning VAT is ultimately borne by the end consumer rather than businesses in the supply chain.

There are three rates of VAT in the UK:

• Standard rate (20%): Applies to most goods and services including electronics, clothing for adults, most food eaten out, and professional services.
• Reduced rate (5%): Applies to domestic energy (gas and electricity), children's car seats, mobility aids, and some energy-saving materials.
• Zero rate (0%): Applies to most food bought in shops, children's clothing, books, newspapers, and prescription drugs. Zero-rated goods are still VAT-taxable; the rate is simply 0%.

Some items are exempt from VAT entirely, which differs from zero-rating. Exempt items include financial services, insurance, education, and most healthcare. Businesses selling only exempt goods cannot register for VAT and cannot reclaim input tax. For current rates and a full list of what is taxable, exempt, or zero-rated, see the HMRC VAT rates guidance on GOV.UK.

Worked examples

When to use this

This calculator is useful in four practical UK contexts:

• Self-employed invoicing: If you are VAT-registered, every invoice to a business client must show the net amount, VAT rate, VAT amount, and gross total separately. Getting this right is a legal requirement for HMRC compliance.
• Reclaiming input VAT: Registered businesses can reclaim VAT paid on allowable business purchases. The calculator quickly isolates the VAT element from each gross figure, making it easy to total up reclaims across a quarter.
• Checking a supplier quote: Trade quotes often show prices ex-VAT. Confirming the final figure before approving a purchase helps avoid budget surprises when the invoice arrives with VAT added.
• Comparing prices for consumers vs businesses: A consumer pays the full VAT-inclusive price, while a VAT-registered business effectively pays only the net. A £600 laptop (£500 + £100 VAT) costs a business £500 after reclaiming the tax, making it easier to justify business purchases at higher list prices.

Understanding the result

When you add VAT, the gross total is always higher than the net by the VAT amount. For standard-rate VAT, the gross is 1.2 times the net, which means VAT is one sixth of the gross (not one fifth, which is a common mistake). For the 5% reduced rate, the gross is 1.05 times the net, and VAT is one twenty-first of the gross.

When you remove VAT, the net is always a smaller number than the gross. For 20% VAT, the net is roughly 83.3% of the gross, not 80%. If your net figure looks unexpectedly low, check you have divided by 1.20 rather than subtracted 20%.

Related concepts

➡ If you are pricing goods for sale, you may want to set your selling price using a cost markup before adding VAT on top. ➡ For VAT reclaims on commission-based income, you can calculate the commission amount from a sales total before applying the VAT calculation. ➡ If you need to find the exact pound amount that any percentage of a price represents, the percentage of a number calculator gives the precise figure for any rate.

How to do this in Excel

For the standard 20% rate, put the net amount in A1 and use =A1*1.2 to get the gross. To isolate the VAT amount, use =A1*0.2. To remove VAT from a gross price in A1, use =A1/1.2. Replace 1.2 with 1.05 for the reduced 5% rate.

How to do this without a calculator

To add 20% VAT mentally, find 10% of the net price by dividing by 10, double it to get 20%, then add to the original. For £85: 10% = £8.50, 20% = £17, gross = £102. To remove 20% VAT from a gross price, divide by 6 to find the VAT, then subtract: £120 / 6 = £20 VAT, net = £100. This shortcut (divide by 6) works because VAT at 20% is exactly one sixth of the gross price.

Real world uses

• Adding 20% VAT to a net quote before sending an invoice to a business customer.
• Removing VAT from a gross price shown on a business receipt to find the reclaimable net amount.
• Checking the VAT element on a domestic energy bill at the reduced 5% rate.
• Calculating the VAT portion on a large purchase before reclaiming it on a VAT return.
• Confirming the correct VAT amount on a self-employed invoice for HMRC compliance.

Common mistakes

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