UK VAT calculator

Which rate applies

The UK has three rates, and the rate depends on what you sell rather than on who you sell it to. HMRC publishes the full list of rates.

• 20% standard — most goods and services, including consultancy, design, writing, software and most physical products.
• 5% reduced — a short list, including children's car seats and domestic energy.
• 0% zero-rated — most food, children's clothes and books. Zero-rated is not the same as exempt: zero-rated sales still count towards your taxable turnover and still go on a VAT return.
• Exempt — postage stamps, some financial and property transactions. Exempt sales do not count towards the registration threshold.

Adding and removing VAT

Adding is straightforward: net × 1.20. Removing is the one people get wrong, because a 20% VAT rate does not mean taking 20% off the gross figure. The VAT is 20% of the net, which is one sixth of the gross:

VAT = gross × 20 ÷ 120  ·  net = gross ÷ 1.20

Take £1,200 gross. VAT is £200, not £240. The percentage you subtract from a gross number is 16.67%, not 20%. If a client sends a total and asks you to "just take the VAT off", this is the calculation they mean, and it is the one that produces a sensible invoice.

When you have to charge it

You must register once taxable turnover passes £90,000 in any rolling 12 months, or if you expect it to pass £90,000 in the next 30 days. The threshold and the registration rules are on GOV.UK. Voluntary registration below the threshold is allowed and sometimes sensible: you can reclaim input VAT, and a VAT number signals a real business to larger clients, at the cost of 20% on your prices and quarterly returns.

Once registered, the invoice has to show the VAT separately, with your VAT number and the rate charged. The required fields are listed in UK invoice requirements, and there is a fill-in template if you would rather not build one.

If you sell outside the UK

Three different systems get confused with each other, and the confusion produces bad invoices:

• UK VAT — charged on sales in the UK. Exports are usually zero-rated, but the evidence requirements matter.
• EU VAT — the EU's own rules, including the OSS scheme for distance selling to consumers. Post-Brexit this is a separate registration, not a continuation of a UK one.
• US sales tax — not a VAT at all. It is set by state and by locality, and whether you owe it depends on nexus. US sales tax nexus for digital products explains the thresholds that now catch small non-US sellers.

Questions

Should I round the VAT or the total?

Round the VAT to the nearest penny, then add it to the net to get the gross. Rounding the gross instead can leave the total a penny off the sum of its parts, which is exactly what an accounts team queries.

Do I charge VAT to a customer in the EU?

Usually no — most business-to-business exports are outside the scope of UK VAT, and the reverse charge applies. Consumer sales into the EU are a separate regime. Either way, keep the evidence: an invoice without proof of export can be reassessed.

What about a deposit?

VAT is due on the deposit when you receive it, at the rate that applies to the supply. If the rate changes between deposit and final invoice, the deposit is taxed at the old rate.

Related: invoicing and getting paid, bookkeeping basics, and UK GDPR for newsletters if you are handling customer data alongside the invoices.