How to Calculate VAT in the UK

Understand net, VAT and gross

The net price is the amount before VAT. The VAT amount is the tax added at the applicable rate. The gross price is the total including VAT.

For a standard-rated item with a £100 net price, VAT is £20 and the customer pays £120 gross. Writing all three figures beside a calculation makes it easier to spot whether a quoted amount already includes VAT.

A calculator can perform the arithmetic, but it cannot decide whether a supply is taxable, which rate applies or whether a business may reclaim VAT. Those questions depend on current rules and circumstances.

Check the current UK VAT rate

As reviewed in August 2026, GOV.UK lists the standard rate as 20% for most goods and services, a reduced rate of 5% for certain supplies and a zero rate of 0% for specified goods and services. Some supplies are exempt.

Zero-rated and exempt do not mean the same thing for VAT accounting. Do not choose a rate from the product name alone: use the current GOV.UK VAT rates guidance and the detailed rules for the relevant supply.

If the transaction is unusual, mixed, international or important to a VAT return, obtain advice from HMRC or a qualified tax professional.

How to add 20% VAT

To find the VAT amount from a net price:

VAT = net price × 0.20

To find the VAT-inclusive gross price directly:

Gross price = net price × 1.20

Example: a service costs £250 before VAT. The VAT is £250 × 0.20 = £50. The gross price is £250 + £50 = £300. Multiplying £250 by 1.20 gives the same £300 result.

These formulas match HMRC’s published standard-rate method. Keep full precision during a multi-line calculation and apply the appropriate invoicing and rounding process rather than repeatedly rounding intermediate values.

How to remove 20% VAT from a gross price

Do not subtract 20% from a VAT-inclusive total. At the standard rate, the gross price represents 120% of the net price, so divide by 1.20:

Net price = gross price ÷ 1.20

VAT amount = gross price − net price

Example: a gross total is £180. The net price is £180 ÷ 1.20 = £150. VAT is £180 − £150 = £30.

Subtracting 20% from £180 would produce £144, which is wrong. The original £30 VAT is 20% of the £150 net amount but only one-sixth of the £180 gross total.

How to calculate the reduced 5% rate

When the reduced rate genuinely applies, multiply a net price by 1.05 to add VAT. To remove it from a gross price, divide by 1.05.

Example: £200 net × 1.05 = £210 gross. The VAT amount is £10. Going backwards, £210 ÷ 1.05 = £200 net.

The arithmetic is simple; deciding eligibility is not. Confirm the supply is reduced-rated before using 5%. A zero-rated transaction adds no VAT, but it may still need to be treated as a taxable supply in the business’s records.

Common VAT calculation mistakes

• Assuming every price excludes VAT: consumer prices often already include it.
• Subtracting 20% from a gross total: divide by 1.20 instead.
• Using the standard rate automatically: check reduced, zero-rated and exempt rules.
• Confusing zero-rated with exempt: they have different VAT treatment.
• Rounding every line too early: retain appropriate precision and follow invoice rules.
• Treating a calculator as tax advice: it calculates the selected rate but cannot classify a transaction.

Check invoices and keep suitable records

A VAT-registered business has responsibilities for charging the correct rate, issuing appropriate invoices and recording output and input tax. The figures in a calculator should agree with the underlying invoice and accounting records.

Before reclaiming an amount, check that you have the required evidence and that the purchase is eligible. Special schemes, imports, partial exemption and mixed-use costs require rules beyond a simple percentage calculation.

Use HMRC’s charge, reclaim and record VAT guidance as the authoritative starting point. UsefulFox provides general arithmetic assistance and educational information, not tax or accounting advice.

A quick VAT invoice sense-check

When reviewing a simple standard-rated invoice, confirm whether each listed price is net or gross, check the VAT rate shown and add the line amounts independently. At 20%, a £500 net subtotal should show £100 VAT and a £600 gross total. If the document instead begins with a £600 VAT-inclusive total, dividing by 1.20 should recover the £500 net amount.

A difference does not always mean the percentage formula is wrong: discounts, delivery charges, mixed VAT rates, rounding and credit notes can change the presentation. Trace each component rather than forcing the total to match one rate. Ask the supplier to correct an invoice that is incomplete or inconsistent before relying on it for records.

Quick UK VAT examples

£60 plus 20% VAT: £60 × 1.20 = £72, including £12 VAT. £12,000 plus 20% VAT: £12,000 × 1.20 = £14,400, including £2,400 VAT.

Removing 20% VAT from £120: £120 ÷ 1.20 = £100 net, so the VAT element is £20. Do not simply subtract 20% from the gross total; that would give £96 and is not the reverse of adding 20% VAT.

Use the UsefulFox UK VAT Calculator to add or remove VAT at 20%, 5%, 0% or a custom rate.

Frequently asked questions