How to add and remove VAT
VAT (Value Added Tax) is a tax added to the price of most goods and services in the UK. The standard rate is 20%, with a reduced rate of 5% on some items and a zero rate on others. The maths is simple once you know whether you're starting from a price that already includes VAT or not.
To add VAT to a net (VAT-exclusive) price, multiply by 1.20 for the standard rate. To remove VAT from a gross (VAT-inclusive) price, divide by 1.20. A handy shortcut for the 20% rate: the VAT portion of a gross price is exactly one sixth of it — so £120 gross contains £20 of VAT (£120 ÷ 6).
Worked examples at 20%
Adding VAT: a net price of £100 × 1.20 = £120 gross, made up of £100 net + £20 VAT.
Removing VAT: a gross price of £150 ÷ 1.20 = £125 net, so the VAT included was £25 (which is £150 ÷ 6).
The four VAT categories explained
Not everything is taxed at 20%, and there's an important difference between "zero-rated" and "exempt" that trips people up:
| Category | Rate | Typical examples |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced | 5% | Domestic gas and electricity, children's car seats, some energy-saving materials |
| Zero-rated | 0% | Most food, books and newspapers, children's clothing, public transport |
| Exempt | No VAT | Insurance, most financial services, postage stamps, health and education |
Zero-rated is not the same as exempt. Zero-rated sales still count as taxable (at 0%), so a business selling them can still register and reclaim the VAT it pays on its own costs. Exempt sales fall outside VAT entirely, and a business making only exempt supplies generally cannot reclaim VAT on its purchases.
VAT registration: the £90,000 threshold
A business must register for VAT once its VAT-taxable turnover exceeds £90,000 over any rolling 12-month period, or if it expects to pass that figure in the next 30 days. You can also register voluntarily below the threshold — some small businesses do this so they can reclaim VAT on their costs. Once your turnover falls below the £88,000 deregistration threshold, you can apply to come off the VAT register.
How VAT-registered businesses account for it
If you're VAT-registered, you charge VAT on your sales (called output VAT) and reclaim the VAT you pay on business purchases (input VAT). Each VAT period you pay HMRC the difference — output VAT minus input VAT — or claim a refund if you've paid more than you've charged. Most businesses now submit these returns digitally through Making Tax Digital. For everyday consumers, VAT is simply part of the price you see at the till.
Frequently asked questions
How do I add 20% VAT to a price?
Multiply the net price by 1.20. For example £100 becomes £120, with £20 of VAT. Enter the net amount and choose “Add VAT” above.
How do I remove or reverse VAT?
Divide the VAT-inclusive price by 1.20. For example £120 becomes £100 net, so £20 was VAT. Choose “Remove VAT” in the calculator.
What is the VAT fraction for working out the VAT in a gross price?
At the 20% rate the VAT is one sixth (1/6) of the gross price. So £120 gross contains £20 of VAT. At 5% the fraction is 1/21.
What is the current UK VAT rate?
The standard rate is 20%. A reduced 5% rate and a 0% rate apply to certain goods and services.
What is the difference between zero-rated and exempt?
Zero-rated goods are taxable at 0%, so the seller can still reclaim VAT on costs. Exempt goods fall outside VAT, and the seller generally cannot reclaim VAT on related purchases.
What is the VAT registration threshold?
A business must register for VAT once its taxable turnover exceeds £90,000 over a rolling 12-month period. The deregistration threshold is £88,000.
Can I reclaim VAT if I'm not registered?
No. Only VAT-registered businesses can reclaim the VAT they pay on purchases. Registering voluntarily is possible below the threshold if it's worthwhile for your business.
Is this VAT calculator free?
Yes, completely free, with no signup. The calculation runs in your browser.