VAT Calculator

Three UK VAT rates

Most goods and services are charged the standard rate of 20%. A reduced rate of 5% applies to a specific list of goods and services (such as home energy and some children's car seats), and a 0% zero rate applies to another specific list (most food, books, and children's clothes). This calculator lets you pick whichever rate applies to your transaction.

Adding VAT to a net amount

If you have a net (VAT-exclusive) price and need to work out what to charge including VAT, this calculator multiplies your amount by the rate and adds it on — the standard method for pricing an invoice from a cost or fee that excludes VAT.

Removing VAT from a gross amount

If you have a VAT-inclusive (gross) price — a receipt total, or a price a customer has already paid — and need to know the net amount and how much VAT was charged, this calculator divides the gross amount by (1 + the rate) rather than simply taking a straight percentage off, since VAT is calculated on the net figure, not the gross one.

Who needs to charge VAT

A business must register for VAT once its taxable turnover passes the VAT registration threshold, and can register voluntarily below it. Once registered, VAT-registered businesses charge VAT on their taxable sales and can reclaim VAT on eligible purchases — the difference is what's paid to or reclaimed from HMRC on the VAT return.

Filing the actual VAT return

This calculator handles a single transaction. A full VAT return totals output VAT (charged on sales) against input VAT (paid on purchases) across a whole quarter, and must be filed digitally under Making Tax Digital for VAT. See ac-co's VAT product for a return built directly from your bank transactions.

A worked example

A freelancer invoices a client £1,000 plus VAT at the standard rate. Adding VAT gives a gross invoice total of £1,200 — £1,000 net plus £200 VAT. If instead a customer has paid a gross, VAT-inclusive total of £1,200 and you need to know the net amount for your accounts, dividing £1,200 by 1.20 gives back the same £1,000 net figure and £200 VAT — the two directions are exact inverses of each other.

Common mistakes to avoid

The most common error is taking 20% straight off a gross, VAT-inclusive amount to find the net figure — because VAT is calculated on the net amount, not the gross, that overstates the VAT and understates the net price. The correct method divides the gross by 1.20 (for the standard rate), not by multiplying by 0.80. Another common mistake is applying the standard rate to a reduced- or zero-rated item by default — always check the specific goods or service against HMRC's published rate list before assuming 20% applies.

Invoicing correctly

A VAT-registered business must show VAT separately on its invoices — the net amount, the VAT rate applied, the VAT amount, and the gross total — so a customer can see exactly what was charged and, if they're VAT-registered themselves, reclaim it. Getting the add/remove direction wrong on an invoice is a common source of disputes with customers and mismatches on a VAT return, which is exactly what this calculator is built to prevent.

Reclaiming input VAT

A VAT-registered business can generally reclaim the VAT it's charged on purchases used for its taxable business activities, subject to some restrictions (business entertaining, for example, usually isn't reclaimable). This calculator works out the VAT on one amount either way; the reclaim itself happens through the quarterly VAT return, netting input VAT against the output VAT charged on sales.