How to add VAT
Multiply the price before VAT by 1 plus the rate. At the UK standard rate of 20%, that means multiplying by 1.2.
£100 × 1.2 = £120.00
£249.99 × 1.2 = £299.99
£1,000 × 1.2 = £1,200.00
At the reduced rate of 5% you multiply by 1.05.
How to remove VAT
Divide the price including VAT by 1.2. Do not take 20% off the total: that gives the wrong answer because the 20% was worked out on the smaller, pre-VAT figure.
Right£120 ÷ 1.2 = £100 net, £20 VAT
Wrong£120 − 20% = £96, which is £4 short
The shortcut HMRC uses is the VAT fraction. Multiply a VAT-inclusive price by the fraction to get the VAT inside it.
At 20% the fraction is 1/6. At 5% it is 1/21.
At 20%£120 × 1/6 = £20 VAT
At 5%£105 × 1/21 = £5 VAT
The reverse VAT calculator is set up for this direction if you do it often.
Which rate applies?
Most goods and services in the UK are standard rated at 20%. Home energy, children's car seats and some mobility aids are reduced rated at 5%. Most food, children's clothes, books and newspapers are zero rated. Some things, such as insurance, most financial services and some education and health services, are exempt, which is not the same as zero rated. The UK VAT rates guide has the full breakdown.
If you sell abroad, the EU VAT rates table has the current rate for every member state, with a calculator on each country's page.
Rounding
The calculator rounds to the nearest penny. HMRC lets you round the VAT on each invoice line to the nearest penny or down to the penny, as long as you are consistent. Over a long invoice the two methods can differ by a few pence, which is normal.
Questions
Is VAT always 20% in the UK?
No. 20% is the standard rate and covers most sales, but 5% and 0% rates apply to some goods and services, and some are exempt. The rate depends on what you sell, not who you are.
Do I charge VAT if I am not registered?
No. You can only charge VAT if you are VAT registered. You must register once your taxable turnover goes over £90,000 in any rolling 12 months. The threshold checker tracks this month by month.
How do I work out VAT backwards from a total?
Divide the total by 1.2 to get the net price, or multiply the total by 1/6 to get the VAT. For £60 including VAT, the net is £50 and the VAT is £10.
