VAT Calculator

UK VAT: adding it, removing it, and not mixing the two up

VAT (Value Added Tax) in the UK has three rates: the standard 20% on most goods and services, the reduced 5% (domestic energy, children’s car seats, some renovations) and zero (most food, books, children’s clothes). The calculator above works in both directions: add VAT to a net price, or extract the VAT hidden inside a gross price.

The direction matters more than people expect. Adding 20% is multiplication by 1.20 — but removing VAT from a gross price is division by 1.20, not subtracting 20%. A £120 gross invoice contains £100 net + £20 VAT; subtracting 20% of £120 would wrongly give £96. The error is exactly why “reverse VAT” calculators exist — and why finance teams still catch it in expense claims every month.

Worked examples

Adding: a £850 quote plus 20% VAT = 850 × 1.20 = £1,020 (VAT: £170). Removing: a £250 restaurant receipt at 20% contains 250 ÷ 1.20 = £208.33 net and £41.67 VAT — the number a business reclaims. At the reduced 5% rate, a £630 energy bill contains £600 net and £30 VAT.

Practical VAT points

• Registration threshold: £90,000 of taxable turnover in any rolling 12 months — not the calendar year. Passing it by accident and registering late brings penalties, so monitor the rolling total.
• Voluntary registration below the threshold can pay off if your customers are VAT-registered businesses (they reclaim what you charge) and you have significant VAT on costs to recover.
• Invoices must show VAT separately — rate, net, VAT and gross — for the customer to reclaim it.
• The Flat Rate Scheme simplifies admin for small businesses (a fixed percentage of gross turnover) but usually means you cannot reclaim VAT on purchases — compare before joining.
• Zero-rated is not exempt: zero-rated sales count as taxable turnover (you can reclaim input VAT); exempt sales (insurance, education, postage) do not.

Additional questions

Which rate applies to my product?

Most things are standard 20%. The reduced and zero-rate lists are specific and occasionally surprising (a plain biscuit is zero-rated; a chocolate-covered one is 20% — the famous Jaffa Cake case turned on exactly this). When in doubt, check HMRC’s VAT rate guidance for your exact item.

Why do shops show gross prices but builders quote net?

Consumer-facing prices must include VAT by law; business-to-business quotes are conventionally net because business customers reclaim the VAT. Always ask which one a quote is — on £10,000 of work the difference is £2,000.

Does VAT differ in Scotland, Wales or Northern Ireland?

No — VAT is UK-wide with identical rates. Northern Ireland has special rules for goods moving to and from the EU, but the rates you pay in a shop are the same everywhere.