What is the current UK standard VAT rate?

The standard UK VAT rate is 20%. A reduced rate of 5% applies to some goods and services such as home energy, and certain items are zero-rated at 0%.

How do I add 20% VAT to a net price?

Multiply the net amount by 1.20. For example, £100 net × 1.20 = £120 gross. The VAT portion is £20.

How do I remove VAT from a gross price?

Divide the gross amount by 1.20 to get the net amount, then subtract the net from the gross to find the VAT. For example, £120 ÷ 1.20 = £100 net, so the VAT is £20.

Why do I divide by 1.20 instead of multiplying by 0.20?

Multiplying a gross price by 0.20 gives you 20% of the gross, not the VAT included. The VAT is already embedded in the gross, so you must divide by 1.20 to strip it out correctly.

When do I need to register for VAT?

You must register for VAT if your taxable turnover exceeds the current VAT threshold in any 12-month period. You can also register voluntarily if it makes sense for your business. Check the latest threshold on GOV.UK.

No. This guide is for general information and planning only. It does not constitute tax or accounting advice. Always speak to a qualified accountant or check GOV.UK for the latest rules.

How to Add and Remove VAT in the UK (Simple Guide)

What is VAT?

VAT — Value Added Tax — is a tax on the value added to goods and services at each stage of production or distribution. In the UK, the business selling the goods or service collects VAT from the customer and passes it on to HMRC.

If you are VAT registered, you charge VAT on your sales (output tax) and can reclaim VAT on your purchases (input tax). The difference is what you pay to HMRC.

UK VAT rates

The UK has three main VAT rates:

Standard rate — 20%: Applies to most goods and services
Reduced rate — 5%: Applies to home energy, children's car seats and some other items
Zero rate — 0%: Applies to most food, books, children's clothes and newspapers

Some goods and services are exempt from VAT altogether, which is different from being zero-rated. Always check GOV.UK — VAT rates if you are unsure which rate applies.

How to add VAT

To add VAT to a net (VAT-exclusive) price, multiply by 1 + the VAT rate as a decimal.

gross = net × (1 + VAT rate ÷ 100)

At the standard 20% rate, you multiply the net by 1.20.

How to remove VAT

To remove VAT from a gross (VAT-inclusive) price, divide by 1 + the VAT rate as a decimal.

net = gross ÷ (1 + VAT rate ÷ 100)

At the standard 20% rate, you divide the gross by 1.20. Then subtract the net from the gross to find the VAT amount.

Example calculations

Adding 20% VAT to £100

£100 × 1.20 = £120 gross

VAT = £120 − £100 = £20

A net price of £100 becomes £120 when 20% VAT is added. The VAT portion is £20.

Removing 20% VAT from £120

£120 ÷ 1.20 = £100 net

VAT = £120 − £100 = £20

A gross price of £120 has a net amount of £100 and VAT of £20.

Freelancer example

A freelance web developer quotes a client £2,000 for a project. This is a VAT-exclusive price because the client is also VAT registered. The developer adds 20% VAT:

£2,000 × 1.20 = £2,400 gross

VAT = £400

The client pays £2,400 and the developer passes £400 to HMRC.

Retail example

A small online shop sells a product for £60 including VAT. The owner needs to know how much VAT is included:

£60 ÷ 1.20 = £50 net

VAT = £60 − £50 = £10

Of the £60 sale, £10 belongs to HMRC as VAT.

Common mistakes

1. Multiplying instead of dividing

To find the VAT in a £120 gross price, some people multiply by 20% (£24). That is wrong. The correct method is to divide by 1.20 first (£100 net), then subtract to find the VAT (£20).

2. Confusing VAT-inclusive and VAT-exclusive pricing

UK consumer prices must usually include VAT. If you quote a customer £100 for a service and forget to add VAT, you will only keep £83.33 after paying HMRC. Always be clear whether your prices include or exclude VAT.

3. Using the wrong VAT rate

Most goods and services use 20%, but some use 5% or 0%. Applying the wrong rate can lead to underpaying or overpaying HMRC. Check the rate for your specific product or service on GOV.UK.

When VAT applies

You must charge VAT if:

You are VAT registered
You sell taxable goods or services in the UK (standard, reduced or zero-rated)

You do not charge VAT if you are not registered, or if your supplies are exempt. You must register once your taxable turnover exceeds the VAT threshold — check the current threshold on GOV.UK.

Try the calculator

Want to run your own VAT numbers? Use the VAT Calculator to add or remove VAT instantly at 20%, 5%, 0% or any custom rate.

How to Add and Remove VAT in the UK