Guide · Updated 2026-10-06

How to Calculate VAT in the UK

Add or remove 20 percent VAT, understand the reduced and zero rates, and avoid common mistakes.

Value Added Tax is charged on most goods and services in the UK. The standard rate is 20 percent, a reduced rate of 5 percent applies to items such as domestic fuel, and some goods are zero-rated. Always check current rates on GOV.UK.

Adding VAT to a price

Multiply the net price by 1.2. A £100 item becomes £120, of which £20 is VAT.

Removing VAT from a price

Divide the gross price by 1.2. A £120 total contains £100 net and £20 VAT. A common mistake is subtracting 20 percent of the gross figure, which gives £96 and is wrong.

Quick reference

• Net to gross at 20%: multiply by 1.2
• Gross to net at 20%: divide by 1.2
• VAT portion of a gross price at 20%: divide by 6

Use the VAT Calculator to do it instantly for 20, 5 or 0 percent, then build an invoice with the Invoice Generator. This guide is general information, not tax advice.

Worked examples

• A freelancer invoices £850 net at 20 percent. VAT is £170 and the client pays £1,020.
• A shop shelf price of £59.99 includes VAT. Net is 59.99 / 1.2 = £49.99 and VAT is £10.00.
• A 5 percent reduced-rate item at £200 net carries £10 VAT, so the total is £210.

When do you need to register?

UK businesses must register for VAT when taxable turnover over any rolling 12 months exceeds the registration threshold, which was £90,000 at the time of writing. You can register voluntarily below it, which lets you reclaim VAT on business purchases but means you must charge VAT to customers. Check the current threshold on GOV.UK because it can change at a Budget.

Common mistakes

• Applying 20 percent to the gross price instead of dividing by 1.2.
• Forgetting that some supplies are exempt or zero-rated, such as most children's clothing and many foods.
• Not showing the VAT number and VAT amount on an invoice, which a VAT invoice must include.

Frequently asked questions

What is the difference between zero-rated and exempt? Zero-rated goods are taxable at 0 percent, so you can still reclaim VAT on your costs. Exempt supplies are outside VAT, and you generally cannot reclaim VAT related to them.

Does this guide cover other countries? No. For VAT, GST and sales tax in other countries, see our VAT, GST and sales tax calculators.