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What it calculates: VAT Amount, Net Price (before VAT), Gross Price (with VAT), Rate Applied.
Updated 5 June 2026 · Transparent assumptions
Three rates, and a fourth category that behaves differently
The standard rate applies to most goods and services. A reduced rate covers things like domestic fuel and some renovations. A zero rate covers most food, children’s clothing, books and newspapers.
Zero-rated is not the same as exempt, and the difference is expensive. A zero-rated business charges no VAT but can still reclaim VAT on its purchases; an exempt business charges none and cannot reclaim, which makes the VAT it pays a real cost.
The VAT fraction, not the percentage, extracts tax from a gross price
Adding 20% to a net price is a multiplication. Removing it from a gross price means dividing by 1.2 — equivalently, taking one sixth of the gross. Taking 20% of the gross price overstates the tax by a fifth.
Retail prices to consumers are quoted inclusive and business-to-business prices are usually quoted exclusive, so both directions are needed depending on which side of an invoice you are looking at.
Below the threshold you may still want to register
Registration becomes compulsory once taxable turnover passes the threshold on a rolling twelve-month basis. Below it, registration is optional — and worth considering for a business selling mainly to other VAT-registered businesses, since it allows reclaiming input VAT without making the price effectively higher to customers who reclaim it anyway.
For a business selling to consumers, voluntary registration raises the real price by the VAT rate or cuts the margin by it. The calculation is different in each case, and the answer is genuinely not always to register.
Flat rate, cash accounting and margin schemes
The flat rate scheme charges customers the normal rate but pays HMRC a lower percentage of gross turnover, with limited input reclaim. Cash accounting shifts the timing to when money moves rather than when invoices are issued. Margin schemes for second-hand goods tax only the margin rather than the full price.
Any of these makes the standard calculation here inapplicable. Check which scheme you are on before treating this figure as your liability.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Tax rules vary by country, state, tax year, filing status, income type, deductions, and exemptions. This calculator is educational and uses the values you enter. Always verify final tax treatment with official sources or a qualified tax professional.
Published the calculator with its formula, worked example, assumptions, limitations and a bespoke guide, and added an automated formula test suite covering it.
Tested VAT at the standard, reduced and zero rates in both directions, including the manual rate override.
Tested that removing VAT from a gross price uses the VAT fraction rather than the percentage, which differs by a fifth at the standard rate.
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