How to add and remove VAT
Add VAT: gross price = net price × (1 + rate). Remove VAT: net price = gross price ÷ (1 + rate). VAT amount: net price × rate, or gross price − net price.
| Rate | Add VAT | Remove VAT | VAT share of the gross price | Examples |
|---|---|---|---|---|
| 20% standard | × 1.20 | ÷ 1.20 | 1/6 | Most goods and services |
| 5% reduced | × 1.05 | ÷ 1.05 | 1/21 | Home energy, children's car seats |
| 0% zero | × 1 | ÷ 1 | none | Most food, children's clothes |
The most common mistake
To remove 20% VAT, you divide by 1.2: you don't take 20% off. On £1,200 including VAT, taking 20% off gives £960, while the correct net price is £1,000. The £40 gap then ends up in your books and on your VAT return. A quick check: at 20%, the VAT is always one sixth of the VAT-inclusive price, here £200 out of £1,200.
Zero-rated is not the same as exempt. A zero-rated sale is taxable at 0%: it counts toward your taxable turnover for the £90,000 registration threshold. An exempt sale, such as postage stamps or most financial services, sits outside VAT and does not.
VAT in other European countries
EU countries set their own rates within the framework of the EU VAT Directive, which requires a standard rate of at least 15%: 19% in Germany, 20% in France and 23% in Ireland, for example. Pick "custom rate" and enter the rate you need: the formulas stay the same. The United States has no VAT: states and cities charge a sales tax instead, added at the register under local rules, so this calculator does not apply to US prices.
UK rates and the goods they cover are set by HMRC and listed on gov.uk. This tool does the arithmetic: it does not tell you which rate applies to what you sell.
Frequently asked questions
How do I add VAT to a price?
Multiply the net price (excluding VAT) by 1 plus the VAT rate. At the 20% standard rate, £100 net becomes £100 × 1.20 = £120 including VAT, of which £20 is VAT.
How do I remove VAT from a price?
Divide the VAT-inclusive price by 1 plus the rate. At 20%, £120 including VAT gives £120 ÷ 1.20 = £100 net. Taking 20% off £120 is a common mistake: it gives £96, which is wrong. At 20%, the VAT is always one sixth of the gross price.
What are the current UK VAT rates?
There are three: the standard rate of 20% for most goods and services, the reduced rate of 5% for items such as home energy and children's car seats, and the zero rate of 0% for items such as most food and children's clothes. Some items, like postage stamps and financial and property transactions, are exempt from VAT altogether.
When does a business have to register for VAT?
In the UK, you must register when your total taxable turnover for the last 12 months goes over £90,000, the VAT threshold, or when you expect it to go over £90,000 in the next 30 days alone. You can also register voluntarily below the threshold.