How to add VAT to a price
To add VAT, multiply the net price (the price before VAT) by 1 plus the VAT rate. At the 20% standard rate that means multiplying by 1.2:
VAT = net price × 0.2
So £100 plus VAT is £120, of which £20 is VAT. At the 5% reduced rate you multiply by 1.05, so £250 plus VAT is £262.50.
How to remove VAT from a price
Working backwards is where people go wrong. You can't take 20% off a VAT-inclusive price, because the VAT was calculated on the smaller net figure. Instead, divide by 1.2:
VAT = gross price − (gross price ÷ 1.2)
For example, a £150 bill including VAT is £125 before VAT, so the VAT is £25. If you had simply knocked 20% off you'd get £120, which is £5 out. A quick shortcut: the VAT in any 20% VAT-inclusive price is one sixth of the total (£150 ÷ 6 = £25). At 5%, the VAT is one twenty-first of the total.
UK VAT rates in 2026
| Rate | VAT | Examples |
|---|---|---|
| Standard rate | 20% | Most goods and services, including adult clothes, electronics, restaurant meals, takeaway hot food and most trades' labour |
| Reduced rate | 5% | Home energy such as gas and electricity, children's car seats, mobility aids for older people |
| Zero rate | 0% | Most food, children's clothes, books and newspapers, public transport |
| Exempt | No VAT | Insurance, most financial services, postage stamps, most education and health services |
Zero-rated and exempt items both have no VAT on the price, but they're treated differently on a business's VAT return. A business selling zero-rated goods can still reclaim VAT on its costs; one selling exempt services generally can't.
The standard rate has been 20% since 4 January 2011. Before that it was 17.5%, which you can still use with the "Other rate" option to check old invoices.
Worked examples
| You have | Rate | Sum | Answer |
|---|---|---|---|
| £100 ex VAT | 20% | £100 × 1.2 | £120 inc VAT |
| £150 inc VAT | 20% | £150 ÷ 1.2 | £125 ex VAT (£25 VAT) |
| £250 ex VAT | 5% | £250 × 1.05 | £262.50 inc VAT |
| £84 inc VAT | 5% | £84 ÷ 1.05 | £80 ex VAT (£4 VAT) |
VAT tips for small businesses
- Registration threshold: you must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or you expect it to in the next 30 days alone. Check this on a rolling basis, not just at your year end.
- Quote clearly: if you're VAT registered, tell trade customers whether prices are "plus VAT" or "inc VAT". Prices shown to consumers must include VAT.
- Voluntary registration: you can register below the threshold, which lets you reclaim VAT on costs. It suits businesses selling mainly to other VAT-registered firms.
- Flat Rate Scheme: smaller businesses can pay a fixed percentage of turnover instead of working out VAT on every purchase.
Self-employed and need to know what you'll owe in income tax too? Try the self-employed tax calculator. For general percentage sums, use the percentage calculator.
Frequently asked questions
How do I calculate 20% VAT?
Multiply the price before VAT by 0.2 to get the VAT, or by 1.2 to get the total including VAT. For example, VAT on £80 is £16, making £96 in total.
How do I work out the price without VAT?
Divide the VAT-inclusive price by 1.2 at the 20% rate. For example, £60 including VAT is £50 before VAT, so the VAT is £10.
Why can't I just take 20% off to remove VAT?
Because VAT is 20% of the net price, not of the total. Taking 20% off £120 gives £96, but the real net price is £100. Dividing by 1.2 always gives the right answer.
What is the VAT threshold in 2026?
You must register for VAT if your taxable turnover goes over £90,000 in any rolling 12-month period, or you expect it to go over £90,000 in the next 30 days.
What has 5% VAT in the UK?
The 5% reduced rate applies to things like domestic gas and electricity, children's car seats and mobility aids installed in the homes of people aged 60 or over.
Last reviewed October 2026 using 2026/27 figures. This calculator gives an estimate for guidance only.