For guidance only, not legal or tax advice.
How to add or remove VAT
To add VAT, multiply the net price by 1 plus the rate. At 20%, £100 becomes £100 × 1.2 = £120, so the VAT is £20.
To remove VAT from a price that already includes it, divide by 1 plus the rate. At 20%, £120 ÷ 1.2 = £100. A common mistake is taking 20% off the gross price, that gives £96, which is wrong. At 20%, the VAT inside a gross price is one sixth of it. At 5%, it is one twenty first.
UK VAT rates
| Rate | % | Applies to |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced | 5% | Some goods and services, for example children's car seats and home energy |
| Zero | 0% | Zero rated goods and services, for example most food and children's clothes |
Some things are exempt from VAT or outside its scope altogether. HMRC lists which rate applies to which goods and services. For other countries, choose Other rate and enter that country's rate.
You must register for VAT if your taxable turnover goes over £90,000 in a rolling 12 months, or you expect it to in the next 30 days.
Questions people ask
How do I work out VAT at 20%?
Multiply the net price by 0.2 to get the VAT, or by 1.2 to get the price including VAT. £250 plus VAT is £300.
How do I take VAT off a price?
Divide the price including VAT by 1.2 at the 20% rate, or by 1.05 at 5%. £60 including VAT at 20% is £50 before VAT, with £10 of VAT.
Why is removing 20% not the same as removing VAT?
Because VAT is 20% of the net price, not of the gross price. Taking 20% off £120 gives £96, but the net price is £100. At 20% the VAT is one sixth of the gross price.
What are the UK VAT rates?
20% standard, 5% reduced and 0% zero rate. Some goods and services are exempt or outside the scope of VAT. Check HMRC's list for your products.
When do I have to register for VAT?
When your VAT taxable turnover goes over £90,000 in the last 12 months, or you expect it to go over £90,000 in the next 30 days. You can also register voluntarily.
Can I use this for VAT in other countries?
Yes. Choose Other rate and type in the rate for that country, for example 23% in Ireland. The maths is the same. The rules on what is taxed are not, so check that country's tax authority.
Sources
- GOV.UK. VAT rates, 20%, 5% and 0%
- HMRC. Rates of VAT on different goods and services
- GOV.UK. Register for VAT, £90,000 threshold
- GOV.UK. How VAT works
Tools that automate this
If you charge VAT on every invoice, accounting software can add it for you and keep the records HMRC asks for.
Xero
Accounting
Invoicing and bookkeeping for most businesses.
QuickBooks Online
Accounting
Bookkeeping with built in AI on paid plans, plus a free US plan.
FreeAgent
Accounting
UK sole traders, freelancers and limited companies.
Sage Accounting
Accounting
UK bookkeeping and VAT.
Dext
Bookkeeping
Getting receipts out of shoeboxes and into Xero or QuickBooks.
Powered Now
Job management
UK sole traders in the trades.
Each line says what the tool is best for. Features change, so check each tool before you buy.
Your figures stay in your browser. Nothing you type is sent to us.
Late payment interest, VAT, hourly rates and invoice due dates.