How UK VAT is calculated: add, remove and the 1.20 trap

Net is the price before VAT. VAT is the tax. Gross is net plus VAT — the VAT-inclusive total. On this site, Add VAT treats the figure you type as net. Remove VAT treats it as already inclusive. VAT only is the same arithmetic as add, with the result card leading on the tax line. Nothing you type is stored.

On a £100 net standard-rated sale the three numbers are £100, £20 and £120. Quote the same sale VAT-inclusive and they are still those three numbers. The only thing that changed is which box you typed in.

VAT = net × (rate ÷ 100). Gross = net + VAT, which is the same as net × (1 + rate). At the standard 20% rate, multiply the net by 1.20. At the reduced 5% rate, multiply by 1.05. At zero rate, gross equals net and the VAT line is £0.

£100 net at 20% — the helper’s default. VAT is £20. Gross is £120. That is the FAQ figure on the tool page.

The amount does not change the rate. £250 net at 20% is £50 VAT and £300 gross. £1,200 net at 20% is £240 VAT and £1,440 gross. Same method; larger invoice.

To strip VAT from a VAT-inclusive price: net = gross ÷ (1 + rate), and VAT = gross − net. At 20% that is divide by 1.20. At 5% divide by 1.05. At 0% there is nothing to strip.

£120 inclusive at 20%. £120 ÷ 1.20 = £100 net. VAT is £20. That is the reverse of the default, and the figure people get wrong most often.

The common mistake is to take 20% of the gross. 20% of £120 is £24, which would leave £96. You have invented £4 of VAT that was never in the price. The 20% was applied to the net, so it is 20 pounds in every 120 of the gross — one-sixth — not 20 pounds in every 100.

Scale it up and the error grows. A £2,400 VAT-inclusive invoice at 20% is £2,000 net and £400 VAT if you divide by 1.20. Subtracting 20% of £2,400 would claim £480 of VAT and a £1,920 net — £80 too much tax, which is wrong on a return and wrong on a refund. The helper’s Remove VAT mode is the divide step, not the subtract-20% step.

Another way to write the same remove-VAT step is the VAT fraction: VAT = gross × rate ÷ (100 + rate). At 20%, that is gross × 20 ÷ 120, which simplifies to gross × 1/6. At 5%, it is gross × 5 ÷ 105, or 1/21.

On the £120 example, one-sixth is £20. On the £2,400 invoice, one-sixth is £400. On a £105 reduced-rate inclusive price, 1/21 is £5. On £84 inclusive at 5%, 1/21 is £4.

Road fuel at the pump is a standard-rated price that already includes Fuel Duty and VAT. VAT is one-sixth of the pump figure, not 20% of it. Our fuel-cost calculator does not itemise that split — you type the full pounds-per-litre price. Use this VAT helper only if you need to unpick the tax line inside an inclusive amount.

£100 net, add 20%. The default: £20 VAT, £120 gross.

£120 gross, remove 20%. Divide by 1.20: £100 net, £20 VAT. Extract / VAT-only on £100 net at 20% reports the same £20 tax.

£2,400 gross, remove 20%. £2,000 net, £400 VAT. One-sixth of £2,400.

£100 net, add 5%. Reduced rate: £5 VAT, £105 gross. Removing VAT from that £105 (divide by 1.05) returns £100 net. £80 net at 5% is £4 VAT and £84 gross.

£100 net, add 0%. Zero rate: £0 VAT, £100 gross. The 0% preset is not an exemption (see below). The custom box is for a rate you already know — for example a historic 12.5% hospitality rate: £200 net is £25 VAT and £225 gross.

GOV.UK’s everyday table is three rates. Standard 20% covers most goods and services. Reduced 5% covers some items — GOV.UK’s own examples are children’s car seats and home energy (domestic fuel and power). Zero rate 0% covers some other items — GOV.UK’s examples are most food and children’s clothes. Lists move. A chocolate biscuit is not the same supply as a loaf of bread. Check the official rates on different goods and services, not a web calculator’s dropdown.

Zero-rated is still a taxable supply, just at 0%. A VAT-registered business usually still records it and can often reclaim VAT on related purchases. Exempt is a different legal box: postage stamps, many financial and insurance services, and some property transactions sit here. You generally do not charge VAT on an exempt supply, and you generally cannot reclaim the VAT you were charged on costs related to it. Typing 0% into the calculator is zero-rate arithmetic. It is not an exemption engine, and it will not classify a particular food, policy or course.

From 25 June 2026 to 1 September 2026 inclusive, a temporary reduced rate of 5% applies to certain children’s meals and to tickets for a defined list of family attractions (cinemas, theatres, museums, zoos and similar — the statutory list is on GOV.UK). That is not a new calculator mode. If the supply is in scope, use the 5% preset. After 1 September 2026 those supplies go back to the normal rate unless the law is extended. The helper does not look up the date or the attraction.

You must register for VAT if taxable turnover in the last 12 months goes over £90,000, or you expect it to in the next 30 days. You can register voluntarily below that. Taxable turnover includes zero-rated and reduced-rated sales; it does not include exempt or out-of-scope sales. HMRC’s currently published deregistration limit is £88,000 looking at the next 12 months (VAT Notice 700/1 supplement). Confirm both figures on GOV.UK if you are reading this after a later Budget.

The calculator does not watch a rolling 12-month total, does not set an effective date of registration, and does not file a VAT1. A business that only makes exempt supplies is a different question again. When the threshold is the question, use HMRC’s registration pages, not a net/gross split.

The Flat Rate Scheme. You apply a trade-sector percentage to VAT-inclusive turnover, not 20% on net. Join and leave thresholds are separate (commonly join at £150,000 or less of expected taxable turnover, leave above £230,000). Completely different maths.

The margin scheme (VAT on the profit on second-hand goods, antiques and similar), partial exemption (mixed taxable and exempt supplies, with a recovery percentage), place-of-supply rules (especially services, and where the customer is), the domestic reverse charge in construction, reverse charges on some services from abroad, import VAT and postponed VAT accounting.

Making Tax Digital, cash accounting versus invoice accounting (when you account for a supply, not the rate on it), and Northern Ireland / EU goods rules beyond a mention. None of those are a net × 1.20 box.

Open the UK VAT calculator. Pick Add VAT, Remove VAT or VAT only. Type the amount in pounds. Choose 20%, 5%, 0% or a custom rate you already know. Read net, VAT and gross, and copy the three-line split if you need it on a quote. Nothing you type is stored.

If the price is a pump price, use the fuel-cost calculator for litres × £ per litre; come back here only if you need to unpick the VAT inside that inclusive litre price. The percentage calculator is generic percent maths, not a VAT rate table. Income Tax and National Insurance are on earnings, not on a sale — do not mix them with VAT.