UK VAT Rates Explained
The UK has three VAT rates in 2026/27:
- Standard rate (20%): applies to most goods and services
- Reduced rate (5%): applies to certain goods and services including home energy, children's car seats and some residential renovation work
- Zero rate (0%): applies to many food items, children's clothing, books, newspapers and most transport
VAT-exempt goods (like most financial services, healthcare and education) are different from zero-rated goods; businesses selling exempt goods cannot reclaim input VAT, whereas those selling zero-rated goods can.
How VAT is Calculated
To add VAT to a net (ex-VAT) price: multiply by (1 + rate). For 20% VAT: net × 1.20 = gross.
To remove VAT from a gross (inc-VAT) price: divide by (1 + rate). For 20% VAT: gross ÷ 1.20 = net. The VAT element is then gross − net.
The VAT fraction for 20% is 1/6, so the VAT in a 20% inclusive price is gross × (1/6). This is useful for mental arithmetic and is commonly used in accounting.
Worked example: adding and removing VAT
A sole trader quotes a job at £250.00 before VAT and needs the invoice total at the standard 20% rate. With "Add VAT" selected, the calculator multiplies £250.00 by 1.20 and shows a gross price of £300.00, of which £50.00 is VAT.
Going the other way, a household energy bill of £84.00 includes VAT at the reduced 5% rate. With "Remove VAT" selected, the calculator divides £84.00 by 1.05, giving a net price of £80.00 and £4.00 of VAT. Home energy is one of the reduced-rate items listed above, which is why 5% applies here rather than 20%.
VAT Registration and Thresholds
Businesses must register for VAT when their taxable turnover exceeds the VAT registration threshold. For 2026/27 this is £90,000, the level it has been since 1 April 2024 (raised from £85,000). You must register if taxable turnover over the last 12 months goes above £90,000, or if you expect it to go above £90,000 in the next 30 days alone. Below this threshold, registration is voluntary.
VAT-registered businesses charge VAT to their customers (output tax), but can reclaim VAT on their own business purchases (input tax). The difference is paid to HMRC through VAT returns, usually every quarter.
If you are not VAT registered, any VAT shown on a supplier invoice is simply a cost to your business; you cannot reclaim it.
Frequently asked questions
What is the current standard UK VAT rate?
The standard UK VAT rate is 20%, and has been since January 2011. There is also a reduced rate of 5% for certain goods such as domestic energy and children's car seats, and a zero rate (0%) for items like most food, children's clothing and books.
How do I remove VAT from a price?
To remove 20% VAT from a gross (VAT-inclusive) price, divide by 1.20. For example, £120 ÷ 1.20 = £100 (net price), and the VAT is £20. For 5% VAT, divide by 1.05.
What is the difference between zero-rated and VAT-exempt?
Zero-rated goods have a VAT rate of 0%; the supply is still technically a taxable supply but VAT charged is £0. Businesses selling zero-rated goods can still register for VAT and reclaim input VAT. VAT-exempt goods are outside the VAT system altogether; businesses selling only exempt goods cannot register for VAT and cannot reclaim input VAT.
When do I need to register for VAT?
You must register for VAT when your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period (the threshold since 1 April 2024, still in force for 2026/27), or if you expect it to exceed £90,000 in the next 30 days alone. You can also voluntarily register if your turnover is below this threshold, which may be beneficial if you have significant input VAT to reclaim.
Can I use this calculator for invoice amounts?
Yes. Simply enter the net amount and select "Add VAT" to get the invoice total, or enter the invoice total and select "Remove VAT" to find the underlying net amount. Use the copy buttons to quickly transfer values to your invoice or accounting system.