First, know your starting point
Every VAT calculation starts from one of two figures:
- Net — the price before VAT.
- Gross — the price including VAT.
If your figure is net, you add VAT. If your figure already includes VAT (a shop price, a till receipt total, a supplier's invoice total), you remove VAT to find the net amount and the VAT element. Mixing the two up is the single most common VAT mistake.
Formula 1 — Adding VAT to a net price
And the VAT amount on its own is simply:
Worked example — adding 20% VAT
A builder quotes £2,400 net for a job. VAT at 20% = £2,400 × 0.20 = £480. The customer pays £2,400 + £480 = £2,880. The builder keeps £2,400 and owes the £480 to HMRC as output VAT (minus any input VAT on materials).
Formula 2 — Removing VAT from a gross price
Then the VAT inside the price is Gross − Net.
Worked example — removing 20% VAT
A receipt shows £59.99 including VAT at 20%. Net = £59.99 ÷ 1.2 = £49.99. VAT = £59.99 − £49.99 = £10.00. This is the split you need when you are reclaiming VAT on a purchase or analysing sales that were priced VAT-inclusive.
The VAT fraction shortcut
Accountants often extract VAT from a gross figure using a VAT fraction — the share of the gross price that is VAT:
| VAT rate | VAT fraction of the gross price | Example: VAT inside £210 |
|---|---|---|
| 20% | 1/6 (one sixth) | £210 ÷ 6 = £35 VAT, £175 net |
| 5% | 1/21 (one twenty-first) | £210 ÷ 21 = £10 VAT, £200 net |
| 0% | 0 | No VAT included |
The fraction works because, at 20%, the gross is 120% of the net, so the VAT (20) is 20/120 = 1/6 of the whole. At 5%, it is 5/105 = 1/21.
A complete invoice example
Here is how the numbers appear on a real VAT invoice. A design studio invoices a client for three items, all standard-rated:
| Description | Net | VAT (20%) | Gross |
|---|---|---|---|
| Logo design | £600.00 | £120.00 | £720.00 |
| Website build | £1,800.00 | £360.00 | £2,160.00 |
| Hosting setup | £150.00 | £30.00 | £180.00 |
| Invoice total | £2,550.00 | £510.00 | £3,060.00 |
Notice that the VAT column is 20% of each net line — or, equivalently, 1/6 of each gross line. Both routes give the same answer. A valid VAT invoice must also show the seller's VAT registration number, the invoice date, and a unique invoice number; HMRC lists the full requirements on GOV.UK.
If an invoice mixes rates — say standard-rated goods plus a zero-rated item — calculate each rate group separately and show a subtotal per rate. Our calculator's custom rate option handles one-off percentages for unusual cases.
When must a business register for VAT?
You must register for VAT with HMRC if:
- Your VAT taxable turnover goes over £90,000 in any rolling 12-month period — this threshold has applied since 1 April 2024; or
- You expect your taxable turnover to go over £90,000 in the next 30 days alone.
"Rolling" means you check at the end of every month by adding up the previous 12 months — it is not tied to your accounting year. Taxable turnover includes standard-rated, reduced-rated and zero-rated sales, but not exempt sales or sales outside the scope of UK VAT.
Below £90,000, registration is optional. Some businesses register voluntarily so they can reclaim VAT on their costs, or because their customers are other VAT-registered businesses. If you are registered and your taxable turnover falls below the £88,000 deregistration threshold, you can apply to cancel your registration.
Use the free calculator to add or remove VAT at any rate, instantly.
Open the VAT Calculator