VAT Calculator
Quick and easy VAT calculations for businesses and individuals
What is VAT?
VAT (Value Added Tax) is a consumption tax charged on most goods and services in the UK. The standard VAT rate is currently 20%, with reduced rates of 5% and 0% for certain items. VAT is charged at each stage of production and distribution, but the final tax burden falls on the end consumer.
First introduced in 1973, VAT replaced Purchase Tax and has since become a major source of government revenue in the UK and across Europe.
The Process of VAT
VAT is collected at each stage of the supply chain:
- Manufacturers add VAT to their products when selling to wholesalers
- Wholesalers charge VAT on sales to retailers
- Retailers collect VAT from end consumers
Businesses can reclaim VAT paid on their purchases (input VAT) but must pay VAT on their sales (output VAT). The difference is paid to or reclaimed from HMRC.
How to Calculate VAT
Adding VAT (20%)
To add VAT to a net amount:
- Multiply the net amount by 1.20
- Or multiply by 0.20 to find the VAT amount only
Removing VAT (20%)
To remove VAT from a gross amount:
- Divide the gross amount by 1.20
- Or multiply by 0.166667 (1/6) to find the VAT amount
UK VAT Rates
Standard Rate: 20%
Most goods and services
Reduced Rate: 5%
Home energy, children's car seats
Zero Rate: 0%
Most food, books, children's clothes
Frequently Asked Questions About VAT
When should I register for VAT in the UK?
You must register for VAT when:
- Your VAT taxable turnover exceeds £85,000 in any 12-month period
- You expect to exceed the threshold in the next 30 days alone
- You take over a VAT-registered business
- You receive goods in the UK from the EU worth more than £85,000
You can also register voluntarily if your turnover is below the threshold.
Which items are charged at different VAT rates?
Standard rate (20%):
- Electronics and computers
- Professional services
- Vehicle sales and repairs
- Alcoholic drinks and tobacco
Reduced rate (5%):
- Domestic fuel and power
- Energy-saving materials
- Children's car seats
- Home mobility aids for the elderly
Zero rate (0%):
- Most food items (except restaurant meals)
- Books and newspapers
- Children's clothes and shoes
- Public transport
Latest VAT Updates 2025
Current VAT Registration Threshold
The VAT registration threshold remains at £85,000 until 31 March 2026.
Making Tax Digital (MTD)
All VAT-registered businesses must now follow MTD rules, using compatible software to keep digital records and submit returns.
Common VAT Scenarios
Business-to-Business (B2B)
VAT-registered businesses can usually reclaim VAT on purchases from other VAT-registered businesses.
Business-to-Consumer (B2C)
End consumers pay VAT but cannot reclaim it, as it's a consumption tax.
International Trade
Special VAT rules apply for imports and exports, particularly after Brexit.
Digital Services
Special rules apply to digital services sold to EU consumers.
Related Business Tools
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Invoice Generator
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Need More Help with VAT?
For official guidance and detailed information about VAT, visit HMRC's website.
Visit HMRC Website