If you run a business, freelance, or simply want to know what a price includes, you will deal with VAT constantly. This calculator adds VAT to a net price or strips it out of a gross price in one step, using the UK standard rate of 20% — or any other rate you choose, such as the reduced 5% rate or the 0% rate that applies to most food and children’s clothes.

How it works

Choose whether you are adding VAT (starting from a net, ex-VAT price) or removing VAT (starting from a gross, VAT-inclusive price). Enter the amount and the VAT rate, and the calculator shows you all three figures: the net amount, the VAT amount, and the gross total. That breakdown is exactly what you need for invoices, quotes and expense claims.

Adding VAT is the direction most businesses need when pricing: you know your price before tax and need the figure your customer actually pays. Removing VAT is what you need when a receipt shows a total and you want to reclaim the VAT portion or record the net cost in your accounts.

How the calculation works

To add VAT: multiply the net amount by 1 plus the VAT rate as a decimal. At 20%, that is net × 1.20 = gross. The VAT amount is the net × 0.20.

To remove VAT: divide the gross amount by 1.20. Gross ÷ 1.20 = net, and the difference between the two is the VAT.

The common mistake is to take 20% off the gross price to find the net. That gives the wrong answer, because 20% of the gross is a bigger number than the VAT that was actually added. Dividing by 1.20 is always the correct method at the standard rate. The same logic applies at other rates: divide by 1.05 for the 5% reduced rate.

Worked example

A freelance designer quotes a client £850 net for a project and needs to add 20% VAT for the invoice.

1. VAT amount: £850 × 0.20 = £170
2. Gross invoice total: £850 + £170 = £1,020 (or £850 × 1.20)

Now the reverse: the designer buys a laptop for £1,020 including VAT and wants the net cost for their accounts.

1. Net amount: £1,020 ÷ 1.20 = £850
2. VAT reclaimable: £1,020 − £850 = £170

Tips

• Keep the VAT fraction in mind. At 20%, the VAT inside any gross price is exactly one-sixth of the total. £600 gross contains £100 of VAT. This is a quick mental check when you have no calculator handy.
• Use the right rate for the goods. Most goods and services are 20%, but domestic energy and some renovations are 5%, and most food, books and children’s clothing are 0%. Charging or reclaiming at the wrong rate creates problems with HMRC.
• Watch the registration threshold. If your taxable turnover passes the VAT registration threshold, you must register and start charging VAT — your prices and margins need planning before you cross it, not after.
• Quote clearly to consumers. Prices advertised to the public must include VAT. Business-to-business quotes are often shown ex-VAT, but label them clearly to avoid disputes.
• Round consistently on invoices. HMRC allows rounding VAT down to the nearest penny per line or per invoice — pick one method and stick to it so your invoices and VAT return agree.

FAQ

What is the standard VAT rate in the UK?
20%. It applies to most goods and services. A reduced rate of 5% covers things like home energy, and a 0% rate covers most food and children’s clothes.

How do I take 20% VAT off a price?
Divide by 1.20 — do not subtract 20%. For example, £240 ÷ 1.20 = £200 net, with £40 of VAT. Subtracting 20% would wrongly give £192.

What fraction of a VAT-inclusive price is VAT?
At the 20% rate, VAT is 1/6 of the gross price. At the 5% rate, it is 1/21 of the gross price.

Do I charge VAT on everything I sell?
Only if you are VAT-registered, and some supplies are exempt or zero-rated. If you are not registered, you do not add VAT to your prices at all — but you also cannot reclaim VAT on your purchases.

What is the VAT flat rate scheme?
Small businesses with turnover under £150,000 (excluding VAT) can join the flat rate scheme: instead of tracking VAT on every purchase, you pay HMRC a fixed percentage of your gross turnover, which varies by trade sector. It simplifies paperwork but is not always cheaper — businesses that buy few VAT-able supplies usually benefit most, while those with large VAT-able costs can lose out. Run your own figures both ways before joining.

Can I reclaim VAT on business purchases?
VAT-registered businesses can usually reclaim VAT on goods and services bought for the business, with exceptions such as most cars and business entertainment. Keep valid VAT invoices as evidence.

This calculator is for guidance only and is not professional tax or accounting advice.