A short guide
How do I add VAT to a price?
Multiply the price by 1.2 to add 20% VAT. The VAT is the difference: £250 plus 20% VAT is £50 of VAT and £300 in all. For the reduced rate of 5%, multiply by 1.05. At the zero rate nothing is added.
| Price before VAT | VAT at 20% | Price including VAT |
|---|---|---|
| £10.00 | £2.00 | £12.00 |
| £25.00 | £5.00 | £30.00 |
| £50.00 | £10.00 | £60.00 |
| £100.00 | £20.00 | £120.00 |
| £250.00 | £50.00 | £300.00 |
| £500.00 | £100.00 | £600.00 |
| £1,000.00 | £200.00 | £1,200.00 |
| £2,500.00 | £500.00 | £3,000.00 |
How do I take VAT out of a price?
Divide a price that includes VAT by 1.2 at 20%, or by 1.05 at 5%. Or find the VAT first: HMRC's VAT fraction is the rate divided by 100 plus the rate, which is one sixth at 20% and one twenty-first at 5%. £120 including VAT has £20 of VAT in it (120 divided by 6), so the price before VAT is £100.
Source: HMRC, VAT Notice 700, section 7.3.1, checked on gov.uk on 6 October 2026.
| Price including VAT | VAT inside it | Price before VAT |
|---|---|---|
| £10.00 | £1.67 | £8.33 |
| £25.00 | £4.17 | £20.83 |
| £50.00 | £8.33 | £41.67 |
| £100.00 | £16.67 | £83.33 |
| £250.00 | £41.67 | £208.33 |
| £500.00 | £83.33 | £416.67 |
| £1,000.00 | £166.67 | £833.33 |
| £2,500.00 | £416.67 | £2,083.33 |
Why can't I just take 20% off?
Because the 20% was worked out on the price before VAT, not on the price after it. Twenty per cent of £120 is £24, which would leave £96, and £96 plus 20% VAT is £115.20, not £120. One sixth of £120 is £20, and that is the VAT.
What are the VAT rates in the UK?
There are three, and the one you charge depends on the goods or services you sell.
| Rate | Charge | What it applies to |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced | 5% | Some goods and services, for example children's car seats and home energy |
| Zero | 0% | Zero-rated goods and services, for example most food and children's clothes |
Source: gov.uk, VAT rates, checked on gov.uk on 6 October 2026.
Some things are exempt from VAT, such as postage stamps and financial and property transactions. To check which rate applies to what you sell, gov.uk keeps a guide to the VAT rates on different goods and services.
The standard rate has been 20% since 4 January 2011. Before that it was 17.5%, apart from a spell at 15% from 1 December 2008 to the end of 2009, so an old price list may use a rate you can no longer charge.
Source: HMRC, VAT Notice 700, section 3.3.1, checked on gov.uk on 6 October 2026.
How is VAT rounded to the penny?
This calculator rounds each VAT figure to the nearest penny. HMRC's VAT Notice 700 lets you work out the VAT on each line of an invoice separately and round it to the nearest penny, as long as you do it the same way every time. It also tells a retailer never to round VAT down but allows rounding up or down, so the nearest penny is allowed for both.
Source: HMRC, VAT Notice 700, sections 17.5.1 and 17.6, checked on gov.uk on 6 October 2026.
The free invoice generator and quote generator work out VAT once for the whole document. For one price the figures are the same. With several prices they can differ by a penny, and with a price you typed including VAT they sometimes cannot match exactly, so the calculator tells you before you carry the figures across.
Do I have to charge VAT?
VAT is added to most products and services sold by VAT-registered businesses. A business has to register if its VAT taxable turnover is more than £90,000, and can choose to register if it is less.
Source: gov.uk, How VAT works, checked on gov.uk on 6 October 2026.
How do I turn a VAT calculation into an invoice?
Press Make an invoice or Make a quote under the answer. Each price goes across as a line in the invoice generator or quote generator, as the price before VAT with its rate, and you add who it is for. A price you typed including VAT goes across as the price before VAT, so the VAT shows as its own figure on the paper. Anything you had already written there stays.