How Much Is VAT? UK VAT Calculator Guide

The quick answer: how much is VAT in the UK?

In the UK, VAT (Value Added Tax) is charged by HMRC at three rates: the standard rate of 20%, a reduced rate of 5% for things like domestic fuel and some energy-saving products, and a 0% zero rate for items such as most food and children's clothing. Most goods and services sold by small businesses fall under the standard 20% rate.

So when someone asks 'how much is VAT?', the everyday answer is 20% of the net (pre-tax) price. A £100 net item becomes £120 once 20% VAT is added, and the VAT itself is £20.

This is general information and rates can change. Confirm the current rules and which rate applies to your products with HMRC or a qualified local tax professional before you rely on them.

The two formulas you actually need

Almost every VAT calculation comes down to two directions: adding VAT to a price that does not yet include it, and removing VAT from a price that already does. Getting these the right way round is where most mistakes happen.

• Add VAT (net to gross): net price x 1.20 = gross price.
• VAT amount from a net price: net price x 0.20.
• Remove VAT (gross to net): gross price ÷ 1.20 = net price.
• VAT amount inside a gross price: gross price ÷ 6 (this is the same as gross ÷ 1.20 x 0.20).
• For the 5% reduced rate, swap 1.20 for 1.05 and 0.20 for 0.05.

Step by step: add 20% VAT to a price

1. 1

   Start with your net price

   Take the price before VAT. Say you want to sell a product for £250 excluding VAT.

2. 2

   Multiply by 1.20

   £250 x 1.20 = £300. That £300 is the gross, VAT-inclusive price your customer pays.

3. 3

   Confirm the VAT amount

   Subtract the net from the gross: £300 - £250 = £50. You can check it directly with £250 x 0.20 = £50, the VAT you will owe HMRC on that sale.

4. 4

   Show it clearly on the invoice

   A valid VAT invoice should show the net amount, the VAT rate and amount, and the gross total separately, along with your VAT number.

Step by step: work out the VAT already inside a price

This is the calculation people get wrong most often. If a price already includes VAT, you cannot just take 20% of it, because that 20% would be based on the wrong figure. You need to work backwards.

1. 1

   Start with the gross price

   Take the VAT-inclusive amount, for example a £120 receipt total.

2. 2

   Divide by 1.20 to find the net

   £120 ÷ 1.20 = £100. This is the price before VAT.

3. 3

   Subtract to find the VAT

   £120 - £100 = £20 of VAT. The shortcut for the standard rate is simply gross ÷ 6, and £120 ÷ 6 = £20.

4. 4

   Use it for expense claims

   This is how you reclaim VAT on business purchases: the VAT portion you extract is the input tax you can recover on your VAT Return, provided you have a valid VAT invoice.

Worked examples at each UK rate

• Standard 20%: net £480 x 1.20 = £576 gross; VAT is £96.
• Reduced 5%: net £200 x 1.05 = £210 gross; VAT is £10.
• Zero 0%: net £30 stays £30; VAT is £0 but the sale is still reported.
• Reverse from gross at 20%: £90 gross ÷ 6 = £15 VAT, leaving £75 net.
• Reverse from gross at 5%: £210 gross ÷ 1.05 = £200 net, so £10 VAT.

When you have to charge VAT at all

You must register for VAT with HMRC once your VAT-taxable turnover goes over the registration threshold, which is £90,000 in a rolling 12-month period, or if you expect to pass it within the next 30 days. You can also register voluntarily below that if reclaiming input VAT would benefit you.

Once registered, you charge VAT on your sales, reclaim VAT on eligible purchases, and submit a VAT Return (usually quarterly) under Making Tax Digital using compatible software. Getting the arithmetic right on every invoice is what keeps that return accurate.

Thresholds and rules change over time, so always confirm your current position with HMRC or a qualified accountant rather than relying on a figure you have seen online.

Let software do the VAT maths for you

Calculating VAT by hand is fine for a one-off, but doing it across hundreds of invoices, receipts and refunds is where errors and lost time creep in. Tallium AI is one all-in-one app that handles UK VAT automatically: it adds the correct rate to invoices, extracts the VAT from scanned receipts, categorises expenses with AI, and keeps a running total ready for your VAT Return.

Because accounting, invoicing, POS, inventory and e-commerce all sit under a single account, the VAT on a shop sale, an online order and a supplier bill all flow into the same clean figures. Every plan includes unlimited users with no per-seat fees, so your bookkeeper, partner and staff can all be in without extra cost.

Pricing is one simple flat rate in USD, billed monthly and cancel anytime: the shop/store plan is $79 per unit per month, the online store plan is $159, a warehouse is $99, and a factory is $269, each including the full core accounting, VAT handling, receipt scanning, reports, mobile app and AI insights. See the /pricing page for the full breakdown.