How UK VAT works, in plain English
VAT (Value Added Tax) is a tax on most goods and services sold in the UK. VAT-registered businesses charge VAT on their sales (called output VAT), pay VAT on their purchases (called input VAT), and send the difference to HMRC — usually every three months on a VAT return.
The price you see can be quoted two ways:
- Net — the price before VAT is added.
- Gross — the price including VAT.
Businesses selling to other VAT-registered businesses usually quote net prices, because the buyer can reclaim the VAT. Sales to the public are normally advertised at the gross, VAT-inclusive price. This calculator converts between the two in either direction: choose Add VAT if your figure is net, or Remove VAT if your figure already includes VAT.
The three UK VAT rates
| Rate | Amount | Generally applies to |
|---|---|---|
| Standard rate | 20% | Most goods and services — the default unless a specific lower rate or exemption applies. |
| Reduced rate | 5% | A limited list, including domestic fuel and power, installation of energy-saving materials, and children's car seats. |
| Zero rate | 0% | Most food, children's clothes and shoes, printed books and newspapers, and public passenger transport fares. |
Some supplies — such as most health services, financial services and insurance — are exempt from VAT, which is different from being zero-rated. If in doubt about which rate applies to something you sell, check HMRC's guidance on GOV.UK or ask an accountant.
Worked examples
Example 1 — Adding VAT at 20%
A freelancer charges £450 net for a job. VAT at 20% is £450 × 0.20 = £90, so the invoice total is £450 + £90 = £540 gross.
Example 2 — Removing VAT at 20%
A laptop costs £719.99 including VAT. Net = £719.99 ÷ 1.2 = £599.99, so the VAT inside that price is £719.99 − £599.99 = £120.00. (Quick check: at 20%, the VAT is always exactly 1/6 of the gross price.)
Example 3 — The reduced rate of 5%
A domestic energy bill of £210 includes VAT at 5%. Net = £210 ÷ 1.05 = £200, and the VAT is £10. At 5%, the VAT fraction of a gross price is 1/21.
History of UK VAT rates
The standard rate has changed several times over the years. The modern history most people need is:
| Standard rate | Period | Note |
|---|---|---|
| 17.5% | Up to 30 November 2008 | The long-standing standard rate through the 1990s and 2000s. |
| 15% | 1 December 2008 – 31 December 2009 | A temporary cut to support the economy during the financial crisis. |
| 17.5% | 1 January 2010 – 3 January 2011 | The standard rate returned to 17.5% for one year. |
| 20% | From 4 January 2011 – present | The current standard rate. |
The reduced rate of 5% and the zero rate have applied alongside the standard rate throughout this period. If you are working out VAT on an old invoice, use the custom rate option above and enter the rate that applied at the time.
Frequently asked questions
What is the standard rate of VAT in the UK?
The standard rate is 20%. It has been 20% since 4 January 2011 and applies to most goods and services.
How do I add VAT to a price?
Multiply the net price by 1 plus the rate as a decimal. At 20%, multiply by 1.2: £100 × 1.2 = £120, so the VAT is £20. At 5%, multiply by 1.05.
How do I remove VAT from a price?
Divide the gross price by 1 plus the rate as a decimal. At 20%, divide by 1.2: £120 ÷ 1.2 = £100 net. A common mistake is subtracting 20% of the gross price — that gives the wrong answer, because VAT was added to the smaller net figure.
What is the VAT fraction at 20% and 5%?
The VAT fraction is the share of a VAT-inclusive price that is VAT. At 20% it is 1/6 of the gross price; at 5% it is 1/21. Accountants use these fractions to extract VAT from till receipts quickly.
Which items are charged at the reduced rate of 5%?
A limited list, including domestic fuel and power, the installation of energy-saving materials, and children's car seats. HMRC publishes the full list on GOV.UK.
What does zero-rated mean — and how is it different from exempt?
Zero-rated supplies are taxable at 0%: most food, children's clothes, printed books and newspapers, and passenger transport fares. A business selling zero-rated goods can still register for VAT and reclaim VAT on its costs. Exempt supplies (such as most health and financial services) sit outside VAT entirely, and VAT on related costs usually cannot be reclaimed.
When must a UK business register for VAT?
You must register if your VAT taxable turnover exceeds £90,000 in any rolling 12-month period, or you expect it to exceed £90,000 in the next 30 days alone. The £90,000 threshold has applied since 1 April 2024. Registration below the threshold is optional (voluntary), and the deregistration threshold is £88,000.
Is this calculator affiliated with HMRC?
No. UK VAT Calculator is an independent tool and is not affiliated with HMRC or GOV.UK. Results are estimates for guidance only — confirm important figures with your accountant or HMRC.
New to the maths? Read the step-by-step How to Calculate VAT guide with formulas and full invoice examples.