How to calculate VAT
To add VAT, multiply the net price by (1 + rate). To remove VAT, divide the gross price by (1 + rate). At the UK standard rate of 20% that means × 1.2 and ÷ 1.2. The most common mistake is to take 20% off a VAT-inclusive price, which removes too much.
VAT rates in the UK
| Rate | Applies to (examples) | Multiply net by | VAT share of gross |
|---|---|---|---|
| 20% | Most goods and services | 1.2 | — |
| 5% | Domestic energy, children’s car seats | 1.05 | — |
| 0% | Most food, books, children’s clothes | 1 | — |
How to add VAT
Gross = net × (1 + rate ÷ 100). A plumber quotes £250.00 plus VAT: 250 × 1.2 = £300.00, of which £50.00 is VAT. At 5%: 250 × 1.05 = £262.50.
- Net
- 100
- VAT amount (20%)
- 20
- Gross
- 120
100 × (1 + 20 ÷ 100) = 120
How to remove VAT
Net = gross ÷ (1 + rate ÷ 100). A receipt shows £90.00 including 20% VAT: 90 ÷ 1.2 = £75.00 net, and the VAT is £15.00.
Why not take 20% off? Because the 20% was calculated on the net price, not on the gross. 20% of £90.00 is £18.00, which is more than the £15.00 of VAT actually in the price. Taking 20% off gives £72.00, which is too low.
The 1/6 rule
At 20%, the VAT inside a gross price is exactly one sixth of it (20 ÷ 120). So the VAT in £90.00 is 90 ÷ 6 = £15.00. At 5% the VAT is 1/21 of the gross price (5 ÷ 105). These fractions are handy when checking a receipt without a calculator.
VAT tables at 20%
| Net | VAT | Gross |
|---|---|---|
| £1.00 | £0.20 | £1.20 |
| £5.00 | £1.00 | £6.00 |
| £10.00 | £2.00 | £12.00 |
| £20.00 | £4.00 | £24.00 |
| £50.00 | £10.00 | £60.00 |
| £75.00 | £15.00 | £90.00 |
| £100.00 | £20.00 | £120.00 |
| £150.00 | £30.00 | £180.00 |
| £200.00 | £40.00 | £240.00 |
| £500.00 | £100.00 | £600.00 |
| £1,000.00 | £200.00 | £1,200.00 |
| £5,000.00 | £1,000.00 | £6,000.00 |
| Gross | Net | VAT inside |
|---|---|---|
| £1.20 | £1.00 | £0.20 |
| £6.00 | £5.00 | £1.00 |
| £12.00 | £10.00 | £2.00 |
| £24.00 | £20.00 | £4.00 |
| £60.00 | £50.00 | £10.00 |
| £99.99 | £83.33 | £16.66 |
| £120.00 | £100.00 | £20.00 |
| £240.00 | £200.00 | £40.00 |
| £600.00 | £500.00 | £100.00 |
| £1,200.00 | £1,000.00 | £200.00 |
VAT in other countries
The formulas are the same everywhere; only the rate changes. Standard rates in 2026 include Germany 19%, France 20%, Italy 22%, Spain 21%, the Netherlands 21%, Poland 23%, Ireland 23%, Türkiye 20% (KDV) and Japan 10% (consumption tax). The calculator lets you type any rate.
| Country | Standard rate | €100 net becomes |
|---|---|---|
| Germany | 19% | €119.00 |
| France | 20% | €120.00 |
| Italy | 22% | €122.00 |
| Spain | 21% | €121.00 |
| Netherlands | 21% | €121.00 |
| Poland | 23% | €123.00 |
| Ireland | 23% | €123.00 |
VAT on discounted prices
Shop prices in the UK include VAT, so a discount comes off the VAT-inclusive price and the VAT shrinks with it. A £120.00 coat at 25% off costs £90.00, of which £15.00 is VAT. Use the percent off calculator for the discount and this calculator for the VAT.
For businesses: rounding and invoices
HMRC lets you round the VAT on an invoice to the nearest penny, either per line or on the total, as long as you are consistent. Differences of a penny between the two methods are normal. The calculator shows two decimals, which is what an invoice needs.
If you are VAT-registered, the VAT you charge customers (output tax) minus the VAT you paid on business purchases (input tax) is what you pay HMRC. Keeping net and VAT amounts separate on every invoice makes the return a simple sum.
Worked examples
- A freelancer's invoice: 12 hours at £45.00 = £540.00 net. VAT at 20% is £108.00, so the invoice total is £648.00.
- A builder's quote "including VAT": £4,800.00 gross means £4,000.00 for the work and £800.00 of VAT.
- A household energy bill at 5%: £126.00 including VAT is £120.00 of energy and £6.00 of VAT.
- A restaurant bill: £84.00 including 20% VAT; the VAT is 84 ÷ 6 = £14.00. A 12.5% service charge on top is £10.50.
- Buying abroad: a €100 net product with German VAT (19%) costs €119.00; with Hungarian VAT (27%) it would cost €127.00.
Zero-rated, exempt and outside the scope
Zero-rated goods (most food, books, children’s clothes) carry VAT at 0%: there is no VAT to add, but the seller can still reclaim VAT on its own costs. Exempt items (most insurance, finance, education and health services) are outside the VAT charge altogether, and the seller cannot reclaim input VAT. Items outside the scope (such as wages or statutory fees) never have VAT. For all three, setting the calculator to another rate of 0 gives net = gross.
Common VAT questions on receipts
UK receipts often show the VAT as a separate line, or as "VAT @ 20% included". If a receipt mixes standard-rated and zero-rated items, the VAT applies only to the standard-rated part, so dividing the whole total by 6 overstates it. Work out the VAT for each rate separately and add them up.
Prices you see in shops are always VAT-inclusive for consumers; business-to-business price lists are usually quoted net ("+ VAT"). When you compare a consumer price with a trade price, convert both to the same basis first — the percentage calculator helps once both are net or both are gross.
VAT in a spreadsheet
With a net amount in A2 and the rate in B2 (typed as 20%), the VAT is =A2*B2 and the gross is =A2*(1+B2). To remove VAT from a gross amount in A2, the net is =A2/(1+B2) and the VAT is =A2-A2/(1+B2). Round with =ROUND(…, 2) on each line if you need invoice-ready pennies.
Flat Rate Scheme and VAT thresholds
Small UK businesses can choose the Flat Rate Scheme, where they still charge customers 20% VAT but pay HMRC a fixed percentage of their gross turnover that depends on their trade. The calculation then has two steps: first the 20% on the invoice, then the flat-rate percentage of the VAT-inclusive total. Registration becomes compulsory once taxable turnover passes the VAT threshold over a rolling 12 months; below it, registration is voluntary. Check the current threshold and flat rates on GOV.UK, because both change from time to time.
Why VAT fractions matter
The VAT fraction is simply rate ÷ (100 + rate). At 20% that is 20/120 = 1/6, at 5% it is 5/105 = 1/21, and at Germany's 19% it is 19/119. Multiply any VAT-inclusive price by the fraction to get the VAT inside it: £240.00 × 1/6 = £40.00. It is the same answer as dividing by 1.2 and subtracting, written as a single step.
Summary
To add VAT, multiply the net price by 1 plus the rate. To remove it, divide the gross price by the same factor, or multiply by the VAT fraction to get just the tax. Never take the rate straight off a VAT-inclusive price, keep zero-rated and exempt lines separate on receipts, and round each invoice line to the penny in a consistent way.
Frequently asked questions
How do I add 20% VAT?
Multiply the net price by 1.2.
How do I remove 20% VAT?
Divide the gross price by 1.2. £60.00 ÷ 1.2 = £50.00.
How do I work out the VAT in a price?
At 20%, divide the gross price by 6. At 5%, divide it by 21.
Why is taking 20% off wrong?
Because the VAT was 20% of the net price, which is smaller than the gross price.