VAT Calculator

Use our free VAT calculator to quickly add or remove VAT at the standard 20% rate. Whether you’re working out prices for invoices or checking how much VAT is included in a total, this tool has you covered.

VAT Calculator

VAT Calculator

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VAT FAQs

At Achieving Clarity, we understand that navigating VAT can be challenging, especially if you’re new to it or running a growing business. Whether you need guidance on how VAT works, when to register, or how to keep your records in order, we’re here to help you make sense of it all.

In this FAQ section, we’ve answered some of the most common VAT questions businesses face. From understanding the basics of VAT and how to reclaim it, to more specific queries about VAT returns, registration, and the benefits of using an accountant, you’ll find all the information you need in one place.

We’ve designed these FAQs to be clear, concise, and easy to understand so that you can make confident, informed decisions for your business.

How VAT is Added and Removed

VAT is added to the net price
If an item costs £100 including VAT at 20%, this means the original net price was increased by 20%.

The formula to add VAT is:

Gross price = Net price × 1.2
Where 1.2 represents the original net price plus 20% VAT (100% + 20%).

To remove VAT, divide by 1.2

Instead of simply subtracting 20% (which would give an incorrect result), you need to reverse the process of adding VAT.

Since the gross price already includes VAT, the correct formula to find the net price is:

Net price = Gross price ÷ 1.2

Example Calculation

Let’s apply this to an item costing £100 (including VAT):
£100 ÷ 1.2 = £83.33
This means the original price before VAT was added was £83.33.

The VAT amount itself is calculated as:
£83.33 × 0.2 = £16.67

So, the original net price was £83.33, and the VAT amount added is £16.67.

VAT (Value Added Tax) is a type of tax added to most goods and services in the UK. It’s included in the price you pay at the till or when you receive a bill. The current standard rate is 20%, though some items may have a reduced rate, zero rate, or be exempt altogether.

To work out the VAT-inclusive total, multiply the original price (net amount) by 1.2.

For example, if something costs £100 before VAT, the price including VAT would be: £100 × 1.2 = £120

Don’t subtract 20%! That gives the wrong figure.
Instead, divide the gross amount by 1.2 to find the price before VAT.
So, if the total is £120 including VAT:
£120 ÷ 1.2 = £100

Once you know the net price, multiply it by 0.2 to calculate the VAT:
£100 × 0.2 = £20 VAT
Or if you know the VAT-inclusive total:
£120 – £100 = £20 VAT

The standard rate of VAT in the UK is 20%, but there are other rates depending on what’s being sold:

  • Standard Rate (20%) – Most goods and services

  • Reduced Rate (5%) – Things like home energy and mobility aids

  • Zero Rate (0%) – E.g. most food, children’s clothing, books

  • Exempt from VAT –

    • Insurance and financial services

    • Health services provided by registered professionals

    • Subscriptions to certain clubs and membership organisations

    • Fundraising events held by charities

  • Outside the scope – Wages, certain government fees

If you’re unsure which VAT rate applies to a particular good or service, always check with HMRC or a qualified accountant. Getting it right is essential for compliance and avoiding penalties.

AT (Value Added Tax) applies differently depending on what is being sold and the nature of the transaction. Here’s a breakdown of where VAT may apply and at which rate:

Standard Rate – 20%

The standard rate of VAT in the UK is 20% and applies to most goods and services, including:

  • Electronics and appliances

  • Furniture and homeware

  • Clothing (for adults)

  • Alcohol and tobacco

  • Professional services (e.g. consulting, design)

  • Beauty treatments and hairdressing

  • Online purchases (excluding certain digital publications)

Reduced Rate – 5%

The reduced rate is charged on specific goods and services, often related to health, safety, or energy efficiency. Examples include:

  • Domestic energy (gas, electricity, heating oil)

  • Children’s car seats

  • Mobility aids for older people (when supplied and installed in their home)

  • Certain energy-saving materials and installations (subject to eligibility)

Zero Rate – 0%

Zero-rated items are still taxable but at a rate of 0%. This means VAT is not charged on the sale, but you can usually reclaim VAT on related costs. Examples include:

  • Most food and drink (excluding alcohol, confectionery, and hot takeaway food)

  • Children’s clothing and footwear

  • Printed books, newspapers, and leaflets

  • Prescription medications and some medical equipment

  • Passenger transport (bus, train, air travel)

Exempt from VAT

These goods and services are exempt from VAT. You do not charge VAT on them, and you cannot reclaim VAT on related expenses. Examples include:

  • Insurance and financial services

  • Health services provided by registered professionals

  • Subscriptions to certain clubs and membership organisations

  • Fundraising events held by charities

Outside the Scope of VAT

Some transactions fall completely outside the VAT system. VAT does not apply, and you cannot charge or reclaim it. Examples include:

  • Wages and salaries paid to employees

  • Donations to charities (with no goods or services given in return)

  • Statutory government fees (e.g. passport applications, MOT tests at approved centres)

  • Certain internal business transactions or international dealings with government bodies

A Quick Tip

If you’re unsure which VAT rate applies to a particular good or service, always check with HMRC or a qualified accountant. Getting it right is essential for compliance and avoiding penalties.

From 1 April 2024, you must register for VAT if your business turnover exceeds £90,000 over the past 12 months.
If your turnover drops below £88,000, you may be able to deregister.

You can also choose to register voluntarily even if you’re under the threshold – this can be useful if you want to reclaim VAT on your business expenses.

Most VAT-registered businesses need to submit a quarterly VAT return.
You must file the return and pay any VAT owed within 1 month and 7 days of the end of each VAT period.

Returns must be submitted through Making Tax Digital (MTD) compatible software.

Making Tax Digital (MTD) is a government initiative that requires businesses to:

  • Keep digital VAT records

  • Use approved software to file VAT returns

  • Submit returns electronically

If you’re VAT-registered, MTD rules apply – even if you’re under the registration threshold but registered voluntarily.

Importing: You may need to pay import VAT on goods brought in from outside the UK.

Exporting: Goods that are sold and shipped out of the UK are often zero-rated for VAT purposes, but you must keep proper records.

EU transactions: Since Brexit, the rules have changed – make sure to check the latest guidance.

Reverse charge: For some services bought from abroad, the buyer accounts for the VAT instead of the seller.

  • Subtracting 20% instead of dividing by 1.2 to remove VAT

  • Charging VAT on goods or services that are exempt or zero-rated

  • Missing your registration deadline

  • Using the wrong VAT rate

  • Filing late or using non-compliant software

You need to charge VAT if:

  • Your business is VAT-registered

  • You sell taxable goods or services

  • You’ve gone over the VAT threshold

Even charities and not-for-profits may need to register if they provide taxable services. Always check with HMRC or an accountant if you’re unsure.

Here are a few resources:

The Flat Rate Scheme (FRS) is a simplified VAT scheme for small businesses. Instead of calculating VAT on every sale and purchase, you just pay a fixed percentage of your total turnover to HMRC.

It’s designed to reduce paperwork and make VAT accounting easier.

You still charge VAT to your customers at the standard rate (usually 20%), but when it’s time to pay HMRC, you apply your business sector’s flat rate percentage to your gross turnover (including VAT).

Example:
If your flat rate is 12% and your VAT-inclusive turnover is £10,000, you pay:
£10,000 × 12% = £1,200 to HMRC

Key points:

  • You can’t reclaim VAT on purchases (except on certain capital assets over £2,000).

  • You must have a VAT-inclusive turnover of £150,000 or less to join.

  • You leave the scheme if your turnover exceeds £230,000.

You can find your sector’s percentage rate on the gov.uk website.

Once you register for VAT, there are a few ongoing responsibilities you need to stay on top of:

1. Charge the correct rate of VAT
Apply the right rate (standard, reduced or zero) to the goods or services you sell.

2. Provide VAT invoices
Give your customers VAT invoices showing the VAT amount charged and your VAT number.

3. Keep digital records
Store your sales and purchase records electronically in line with Making Tax Digital (MTD) rules.

4. Submit VAT returns on time
Usually quarterly, you must file VAT returns through MTD-compliant software and pay any VAT owed to HMRC.

5. Pay VAT to HMRC
After calculating what you’ve charged and what you can reclaim, you pay the difference (if you owe VAT) or claim a refund (if you’ve overpaid).

6. Update your details
Tell HMRC if anything changes – like your address, business name, or if you go over or under the VAT threshold.

7. Deregister if required
If your turnover drops below the deregistration threshold or you stop trading, you may need to deregister for VAT.

Tip: Keep everything up to date and submitted on time to avoid penalties and interest charges.

Registering for VAT in the UK is a straightforward process — and it’s something most businesses will need to do once their taxable turnover exceeds £90,000 in a 12-month period. You can also register voluntarily if you’re below the threshold, which can be beneficial for reclaiming VAT on business purchases.

Here’s how it works:

1. Register online via GOV.UK

Most businesses register through the official HMRC VAT registration service. You’ll need to create a Government Gateway account if you don’t already have one.

2. Provide your business details

You’ll be asked for:

  • Your legal business name and trading name (if different)

  • Your company number (if limited) or National Insurance number (if sole trader)

  • Your business address

  • Your estimated turnover

  • Your bank details (for any refunds)

3. Choose your VAT registration date

This can be the date you exceeded the threshold or a date you select voluntarily (if applying early).

4. Get your VAT number

Once registered, HMRC will send you:

  • A VAT registration certificate

  • Your VAT number

  • Details of when to submit your first VAT return

This usually arrives within 2 weeks, but can sometimes take longer.

You’ll need to:

  • Start charging VAT on your sales

  • Display your VAT number on invoices

  • Submit VAT returns using Making Tax Digital-compatible software

  • Keep digital VAT records

You’re legally responsible for meeting all VAT rules from your chosen registration date, even if your certificate arrives a bit later.

If you’ve been given a VAT number and want to make sure it’s valid, it’s a good idea to double-check it — especially if you’re dealing with a new supplier or customer. Thankfully, it’s quick and easy to do.

Use the VAT number checker on GOV.UK

Head over to the official Check a UK VAT number tool provided by HMRC. It’s free to use and lets you verify if a UK VAT number is valid and currently registered.

You’ll need:

  • The VAT number you want to check (usually starts with “GB” followed by 9 digits)

  • The name or company of the business you’re checking (optional, but helpful)

What does it tell you?

  • If the VAT number is valid and registered

  • The name and address of the registered business (as held by HMRC)

This is particularly useful for:

  • Ensuring a supplier is correctly VAT-registered

  • Keeping accurate records for your own VAT returns

  • Avoiding potential scams or invoicing errors

Want to check an EU VAT number?

If you’re working with businesses in the EU, you can use the EU VIES VAT number checker instead.

Managing VAT can be a bit of a headache especially as your business grows or if you’re new to the process. That’s where a good accountant comes in. They don’t just save you time; they can also help you avoid mistakes and make sure you’re not paying more than you need to.

Here are a few key benefits of using an accountant for VAT:

1. They handle all the admin

From registering your business to submitting returns, your accountant can take care of all the paperwork. That includes keeping you compliant with Making Tax Digital rules and reminding you when returns are due.

2. They make sure you’re charging (and reclaiming) correctly

Accountants know which VAT rate to apply to different goods or services and can help you avoid common errors like charging VAT when you shouldn’t, or forgetting to reclaim what you’re owed.

3. They can spot ways to save money

A good accountant might suggest schemes like the Flat Rate Scheme or help you claim VAT back on certain purchases, especially big one-off expenses like equipment or vehicles.

4. They reduce the risk of penalties

Late submissions, incorrect returns, or missed payments can all lead to fines. An accountant helps keep your VAT records accurate and ensures everything’s submitted on time.

5. They give peace of mind

With an expert handling your VAT, you’ve got more time to focus on running your business and fewer worries about getting something wrong.

Tip: Even if you’re confident doing VAT yourself, having an accountant check your returns now and again can still be a smart move, especially around year-end or if something changes in your business.

Yes, you can generally reclaim VAT on business expenses that are directly related to your business activities. This includes things like office supplies, business travel, and professional services. However, there are a few important rules to keep in mind:

  • You can’t reclaim VAT on items used for personal use or for non-business purposes.

  • Some items, like company cars, may have restrictions on reclaiming VAT.

An accountant can help ensure you’re reclaiming VAT correctly, maximising your potential refund.

Missing a VAT deadline can result in penalties and interest charges from HMRC. The fines can vary depending on how late the submission or payment is and whether the error was deliberate. It’s always a good idea to set reminders or let an accountant handle the due dates for you.

The VAT registration threshold in the UK is currently £90,000 in taxable turnover over a 12-month period. If your turnover exceeds this amount, you must register for VAT. You can also register voluntarily if you’re under the threshold, which may benefit your business, especially if you have a lot of VAT to reclaim.

Most products and services are subject to VAT, but there are exceptions, such as zero-rated goods (like children’s clothing and most food) or exempt services (like financial services or health services). If you’re unsure, your accountant can guide you on whether VAT should be applied.

If your business turnover drops below the deregistration threshold of £83,000 (in taxable turnover) over a 12-month period, you may be eligible to deregister. You can also deregister voluntarily if you no longer wish to charge VAT. However, you should still keep records for the required time after deregistration in case HMRC requests them.

This is a common area of confusion. Here’s the key difference:

  • Zero-rated goods and services (such as children’s clothing or books) are still subject to VAT but at a 0% rate, meaning you don’t charge VAT to customers, but you can still reclaim VAT on purchases related to those goods or services.

  • Exempt goods and services (like insurance or financial services) are not subject to VAT, so you can’t charge VAT, and you can’t reclaim VAT on related purchases.

Most VAT-registered businesses will pay VAT to HMRC quarterly, in line with their VAT return cycle. However, some businesses may opt for an annual VAT return if their turnover is below a certain threshold. The payment is usually due one month and seven days after the end of the VAT period, and late payments can incur penalties and interest.

Yes, you may be able to reclaim VAT on goods and services purchased up to 4 years before you registered for VAT, as long as they were used for business purposes. This applies if they’re still in your possession when you register for VAT. For services, the time frame is 6 months before registration.

A VAT invoice is a specific type of invoice used by VAT-registered businesses. It must include specific details such as:

  • The VAT registration number of the business

  • The amount of VAT charged

  • The date of issue

  • The description of the goods or services

  • The total amount payable

A regular invoice may not include this information, as it is not needed for businesses that are not VAT-registered.

Mistakes on VAT returns happen, but it’s important to correct them promptly. If you realise you’ve made an error, you can amend your VAT return either online or through your VAT software. If the mistake means you’ve underpaid VAT, you should pay the difference to HMRC as soon as possible. If you’ve overpaid, you can request a refund.

Making Tax Digital (MTD) is a government initiative aimed at making the tax system more efficient. From April 2019, all VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) must use HMRC-approved digital software to keep VAT records and submit VAT returns. The idea is to reduce errors and make the process more streamlined. Your accountant will be able to help you ensure your business is MTD-compliant.

Yes, VAT can be added to delivery or shipping charges if the product you’re selling is subject to VAT. The delivery cost is treated the same as the goods or services being sold, so if they’re VAT-able, the charge will also be VAT-able. However, if you’re providing a free delivery offer, you don’t add VAT on the shipping cost.

Digital products and services (such as e-books, software, and online subscriptions) may be subject to VAT in the country of the consumer if you’re selling to consumers in the EU. This means you might have to register for VAT in multiple EU countries. If you’re selling to UK customers, the standard VAT rate applies.

Disclaimer

The VAT calculations and information provided on this page are intended as a guide only. While we strive to ensure that the information is accurate and up-to-date at the time of writing (8th April 2025), VAT rates, regulations, and other details may change over time. As such, we recommend consulting with a professional provider to ensure full compliance with current VAT laws and regulations.

Achieving Clarity cannot be held responsible for any errors or inaccuracies in the calculations or the FAQs, and we advise that you seek professional advice tailored to your specific circumstances before making any VAT-related decisions. For accurate, personalised assistance, please reach out to a qualified accountant or VAT expert.