How to work out VAT (add and remove UK VAT)
VAT (Value Added Tax) is a percentage added to the price of most goods and services in the UK. Two calculations come up constantly in business: adding VAT to a price that doesn't yet include it, and removing VAT to find the original price before tax. Both are quick once you know the rate — here's how, with the shortcuts worth memorising.
The UK VAT rates (2025/26)
There are three rates, and picking the right one is the only real decision:
Standard rate — 20%: most goods and services.
Reduced rate — 5%: things like domestic fuel and power, children's car seats, and some energy-saving materials.
Zero rate — 0%: most food, books and newspapers, and children's clothing. These are still "VAT-taxable" — just at 0% — which matters for registration (see below).
Adding VAT to a price
To add VAT, multiply the net (VAT-exclusive) price by 1 + the rate. For standard-rate VAT that's × 1.20.
£100 net + 20% VAT: £100 × 1.20 = £120 gross. The VAT itself is £100 × 0.20 = £20.
At the 5% rate you'd multiply by 1.05 instead.
Removing VAT (working backwards)
This one trips people up. To get the net price out of a VAT-inclusive (gross) figure, you divide — you don't just take 20% off, because the 20% was added to the smaller net figure, not the larger gross one.
£120 gross ÷ 1.20 = £100 net, so the VAT element is £120 − £100 = £20.
The 1/6 shortcut: at 20%, the VAT inside a gross price is exactly one sixth. £120 ÷ 6 = £20. (Taking "20% off" £120 would wrongly give £96 — a common mistake.)
Skip the maths
VAT Calculator (UK)
Add VAT to a net price or remove it from a gross price at 20%, 5% or 0% — with an instant net, VAT and gross breakdown, either direction.
Open the calculator →When do you have to register for VAT?
You must register once your VAT-taxable turnover passes £90,000 in any rolling 12-month period — not just your accounting year — or if you expect to cross it in the next 30 days. Below that, registering is optional. Voluntary registration lets you reclaim the VAT you pay on purchases, which can be worth it if your customers are themselves VAT-registered businesses; the downside is you then have to add VAT to your own prices, which matters if you sell to consumers. The deregistration threshold is £88,000.
Exempt vs zero-rated — not the same thing
Both mean no VAT is charged to the customer, but they behave differently. Zero-rated sales are taxable at 0%, so they count toward the £90,000 threshold and you can reclaim input VAT on related costs. Exempt sales (such as insurance, or certain financial and health services) are outside VAT entirely — they don't count toward the threshold, and you generally can't reclaim VAT on costs linked to them.
Common mistakes
Taking a percentage off to remove VAT. Divide by 1.20, don't subtract 20% — otherwise you'll understate the net price.
Using the wrong rate. Check whether the item is standard, reduced or zero-rated before you calculate; a surprising number of everyday things aren't 20%.
Charging VAT before you're registered. You can't add VAT to invoices until HMRC issues your VAT number.
Forgetting the rolling 12 months. The £90,000 test is any 12-month period, so a busy few months can tip you over mid-year.
Rates and thresholds confirmed against GOV.UK — VAT rates and GOV.UK — VAT registration. Always check the current figures for your situation.