How to Calculate VAT in the UK (2026 Guide)
Updated October 2026 · 4 min read
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Value Added Tax (VAT) is a consumption tax charged on most goods and services sold in the UK. The standard rate is 20%, making it one of the more straightforward taxes to calculate — once you know the rules.
UK VAT Rates in 2024
| Rate | Percentage | Applies to |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced | 5% | Home energy, children's car seats, sanitary products |
| Zero-rated | 0% | Food, books, children's clothing, public transport |
| Exempt | N/A | Insurance, financial services, education, healthcare |
How to Add VAT to a Price
If you have a net (ex-VAT) price and want to find the gross (inc-VAT) price:
Gross price = Net price × 1.20
Example: £100 net → £100 × 1.20 = £120 gross
How to Remove VAT from a Price (Reverse VAT)
If you have a gross (inc-VAT) price and want the net price:
Net price = Gross price ÷ 1.20
Example: £120 gross → £120 ÷ 1.20 = £100 net
VAT amount = £120 − £100 = £20
Never make the mistake of calculating VAT as 20% of the gross price. Always divide by 1.20 to reverse VAT correctly.
VAT Registration Threshold
You must register for VAT if your taxable turnover exceeds £90,000 in any 12-month rolling period (as of April 2024). Once registered, you charge VAT on your sales and can reclaim VAT on business purchases.
Quarterly VAT Returns
Most VAT-registered businesses submit returns every quarter via HMRC's Making Tax Digital (MTD) platform. You pay the difference between output tax (VAT you charged) and input tax (VAT you paid on purchases).
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