VAT Calculator

VAT (Value Added Tax) is a consumption tax added to most goods and services in the UK. The standard rate is 20%, applied to the bulk of business-to-consumer transactions. Reduced rate (5%) covers domestic energy, children's car seats, and some health products. Zero rate (0%) applies to most food, books, children's clothing, and prescription medicines - these items still 'have VAT' in the legal sense, but the rate is 0%, which means VAT-registered sellers can reclaim VAT on related purchases. Exempt items (financial services, education, some property) are different again: no VAT charged but no VAT reclaim either.

If you're a VAT-registered business, you charge VAT on what you sell (output VAT) and reclaim VAT on what you buy (input VAT). The difference is what you pay HMRC every quarter. The current registration threshold is £90,000 of taxable turnover in any rolling 12-month period; once you cross that, registration becomes mandatory within 30 days. Many small businesses register voluntarily before hitting the threshold to reclaim input VAT on big purchases.

Adding VAT: you have a net price (what you charge before tax) and want the gross price (what the customer pays). For 20% VAT, multiply the net by 1.2. £100 net + 20% VAT = £120 gross. Removing VAT: you have a gross price (the bill or quote) and want to find the underlying net price and the VAT portion. For 20% VAT, divide the gross by 1.2 to get the net. £120 gross ÷ 1.2 = £100 net, with £20 of VAT inside.

The most common error is multiplying instead of dividing when removing VAT. Doing 20% off £120 gives £24 of 'VAT' but the actual VAT inside £120 is £20 (because 20% was added to £100, not £120). The calculator handles this correctly: pick 'Remove VAT' mode and it does the right division. This matters a lot for businesses extracting net pricing from a supplier invoice or a customer-facing price quoted gross.

Hospitality VAT: temporarily reduced to 5% during 2020-2022 then back to 12.5% then back to 20%. Always check the current rate when working with old invoices. Construction services on new-build residential property are zero-rated; renovations of existing residential property are at 5% in some cases (mainly long-empty properties); commercial property is generally 20%. The calculator's 12.5% option exists for the (now historic) hospitality rate and is useful when working through old records.

Reverse-charge VAT applies in the construction industry and to some imported services - the customer accounts for both input and output VAT instead of the supplier charging it. The calculator doesn't handle reverse charge directly because the cash effect is zero (you reclaim what you account for), but be aware the gross/net amounts on a reverse-charge invoice are the same as the net figure.