How VAT is added onto a net price
VAT is a percentage of the net price, charged on top by the seller and passed on to HMRC. Unlike a till-added tax, it is nearly always folded into the price you see on a UK shelf or menu before you ever reach the counter, so the sticker price is usually the gross figure, not the net one. To build a gross price from a net figure, multiply the net amount by the rate and add the result back on.
A £100 net price at the UK standard rate of 20% carries £20 of VAT, giving a gross price of £120. Drop the rate to 5% for a reduced-rate item and the same £100 net price only carries £5 of VAT, for a gross of £105. The working never changes, only the rate fed into it.
Removing VAT from a gross price
Invoices, receipts and bank statements usually show the gross figure, the one that already includes VAT, which matters most for a business reconciling its books or reclaiming VAT on a purchase. The instinct is to take the VAT rate straight off that gross figure, and it is the single most common VAT mistake, because the rate was never charged against the gross amount in the first place. It was charged against the smaller net price, so pulling VAT back out means dividing, not subtracting.
Take a £120 gross price at 20%. Subtract 20% of £120, that is £24, and you land on £96, which looks plausible and is wrong. Divide £120 by 1.20 instead and the correct net price appears: exactly £100.00, with £20.00 of VAT. The gap between £96 and £100 is £4 here, and it grows with the rate and the amount, always in the same direction: subtracting overstates the VAT and understates the net price. The calculator's remove mode does the division for you and shows the same comparison against your own figures.
The three UK VAT rates
The UK runs three VAT rates. The standard rate is 20%, and it applies to most goods and services, from electronics to professional fees to a restaurant bill. The reduced rate is 5%, applied to a short, specific list that includes domestic gas and electricity and children's car seats. The zero rate is 0%, applied to most food, books, newspapers and children's clothes; VAT is still technically charged, just at nothing. These figures are set by HMRC and occasionally move at a Budget, so treat them as current rather than permanent.
The 19% and 23% chips on this page are not UK figures; they are Germany's and Ireland's standard rates, included because a business trading across borders, or a traveller comparing a receipt from abroad, needs to plug in a different rate without hunting for it elsewhere. The maths is identical wherever the rate comes from.
Zero-rated and exempt are not the same thing
Both zero-rated and exempt goods carry no VAT on the sale, but they are treated differently behind the scenes, and the difference matters for any VAT-registered business. A business selling zero-rated goods, such as most food, is still within the VAT system, which means it can reclaim the VAT it paid on its own purchases and running costs. A business selling exempt goods or services, such as insurance or postage, sits outside the VAT system for that activity altogether and cannot reclaim the VAT on related purchases. A shopper never notices the split since both show as no VAT on the receipt; a business selling either one certainly does.
Who actually charges VAT
Only VAT-registered businesses charge VAT, and registration becomes compulsory once a business's taxable turnover passes £90,000 in a rolling 12-month period, a figure that has stood since April 2024 but is exactly the kind of threshold that shifts at a Budget, so check GOV.UK before relying on it for a real decision. A business can also register voluntarily below that line, often to reclaim VAT on setup costs. Readers more used to US-style sales tax, where the tax is added separately at the till on top of a pre-tax price, can compare the two directly on our sales tax calculator; the arithmetic is close, but VAT is normally already sitting inside the price you see rather than being added afterwards.
Choosing the right mode and rate
Use "add VAT to a net price" whenever you are starting from a cost price, a quote, or a supplier's net figure and want to know what the customer will actually pay. Use "remove VAT from a gross price" whenever the number in hand already includes VAT, such as a shelf price, a card payment or an invoice total, and you need the underlying net figure for bookkeeping, expenses or a flat-rate VAT return. Enter the rate that genuinely applied to that sale rather than assuming 20% by default; reduced-rate and zero-rated items are common enough that guessing can throw a set of accounts off by real money.
Reading the chart and the table
The donut splits the gross figure into net price and VAT by size, so it is easy to see how much of what changes hands is the underlying price against how much is VAT sitting on top of it. The table beside it holds the same net price steady and reruns it at the other rates on this page, plus whichever rate you typed in if it is not already one of them, so you can compare what an identical net price would cost under a different VAT band.
Questions people ask
What is the VAT rate in the UK?
The UK has three rates: 20% standard, applying to most goods and services; 5% reduced, applying to a short list such as domestic energy and children's car seats; and 0% zero-rated, applying to most food, books and children's clothes.
How do I remove VAT from a price?
Divide the gross price by one plus the VAT rate as a decimal, not by subtracting the rate from the gross price. A £120 gross price at 20% divides by 1.20 to give a £100.00 net price, with £20.00 of VAT. Subtracting the percentage directly gives a lower, wrong net price every time.
What is the VAT registration threshold?
As of April 2024, a business must register for VAT once its taxable turnover passes £90,000 in a rolling 12-month period. This threshold is reviewed at Budgets and can change, so check GOV.UK for the current figure before relying on it.
What is the difference between zero-rated and exempt?
Both charge no VAT on the sale, but a business selling zero-rated goods stays inside the VAT system and can reclaim VAT paid on its own costs, while a business selling exempt goods or services sits outside the VAT system for that activity and cannot reclaim it.
Is VAT the same as sales tax?
Both are percentage taxes on a sale using the same maths to add or remove, but they are administered differently. VAT in the UK and the EU is normally already folded into the shelf price you see, while US sales tax is usually added separately at the till on top of a pre-tax price.
Why does the shelf price already include VAT?
UK and EU consumer law generally requires prices shown to the public to be VAT-inclusive, so shoppers see the final figure upfront rather than having VAT added at the till. Business-to-business quotes are the main exception, where a net figure plus VAT is normal.
Can I reclaim VAT if my business isn't VAT-registered?
No. Reclaiming VAT on purchases is only available to VAT-registered businesses, whether registered compulsorily above the threshold or voluntarily below it. An unregistered business simply pays the VAT-inclusive price with no way to claim it back.
This calculator applies a single VAT rate you provide; it does not look up rates by product category, apply flat-rate scheme percentages, or determine whether a specific item is standard-rated, reduced-rated, zero-rated or exempt. Treat the result as arithmetic on the rate you enter, and confirm that rate and your VAT obligations with HMRC or an accountant for anything that matters financially.