VAT calculator (add or remove VAT)

How to add and remove VAT

VAT is a percentage of the price before VAT (the net price). The standard rate is 20%, so adding VAT means multiplying by 1.2, and taking it off means dividing by 1.2. The most common mistake is taking 20% off a VAT-inclusive price: £120 less 20% is £96, but the real net price is £100, because £120 ÷ 1.2 = £100 and the VAT is £20.

• Add VAT: net × rate = VAT. Net + VAT = gross. On £1,000 at 20%: VAT £200, gross £1,200.
• Remove VAT: gross ÷ (1 + rate) = net. Gross − net = VAT. On £1,200 at 20%: net £1,000, VAT £200.
• The shortcut for 20%: the VAT in a gross price is one sixth of it (£1,200 ÷ 6 = £200). At 5% it is one twenty-first (£105 ÷ 21 = £5).

The three VAT rates

GOV.UK lists three rates: the standard rate of 20% on most goods and services, a reduced rate of 5% on some goods and services (for example children's car seats and home energy), and a zero rate of 0% (for example most food and children's clothes). Some things are exempt from VAT altogether. The rate you charge depends on what you supply, so if you are unsure which applies to a particular job, check the rate on GOV.UK or ask HMRC. Most trade labour and materials are standard rated, but there are specific reliefs for some building work, so don't assume.

Worked examples

1. Quote a job with VAT on top. You quote £1,000 net at 20%. VAT is £200 and the customer pays £1,200. Choose "Add VAT" to check it.

2. Find the net from a receipt. A £250.00 materials receipt includes 20% VAT. Net = £250 ÷ 1.2 = £208.33 and VAT = £41.67. Choose "Remove VAT".

3. Reduced rate. £800 net at 5% gives VAT of £40.00 and a gross price of £840.00.

4. Pennies. A gross price of £99.99 at 20% has a net of £83.325, which rounds half up to £83.33, so the VAT is £16.66. Rounding differences of a penny between software are normal; what matters is that net plus VAT equals the gross figure you show.

5. Domestic reverse charge. You are a VAT-registered subcontractor and invoice a VAT-registered contractor for £5,000 of construction labour covered by the reverse charge. You show £5,000 and no VAT. The customer works out the £1,000 VAT at 20% on their own VAT return. Switch "Domestic reverse charge" to Yes to see this.

VAT registration and the £90,000 threshold

GOV.UK says businesses have to register for VAT if their VAT taxable turnover is more than £90,000, and can choose to register if it is less. Once registered you must include VAT in your prices at the right rate, keep records of VAT you pay on business purchases, and send HMRC a VAT return, usually every three months. The VAT you pay is generally the difference between the VAT you charged and the VAT you paid to others. The small box above compares your turnover to the threshold. It does not replace the registration rules on GOV.UK, so check them when you are close.

Many self-employed tradespeople stay under the threshold and are not VAT registered. If that is you, you must not add VAT to your invoices at all. Our guide to VAT on contractor invoices covers what to put on an invoice either way.

VAT and the construction reverse charge

GOV.UK says the domestic reverse charge must be used for most supplies of building and construction services that are reported within the Construction Industry Scheme, where the supplier and customer are VAT registered in the UK, and it applies to standard and reduced rate services. Under the charge, the supplier doesn't charge VAT. The customer accounts for it. The guidance lists services where it must and must not be used, and the full conditions are on GOV.UK, so always check them for your own situation. Our guide to the domestic reverse charge invoice goes through what the invoice should look like. The CIS deduction is separate from VAT, and you can work it out on the CIS calculator.