VAT explained: adding it, removing it and the registration threshold

Adding versus removing

Adding VAT is straightforward multiplication. Removing it is not: to strip 20% VAT from a gross price you divide by 1.2, you do not subtract 20%. Subtracting the percentage is the most common VAT arithmetic error and always understates the net figure.

The calculator handles both directions and shows the net amount, the VAT and the gross total together.

Which rate applies

Most goods and services use the standard rate. A reduced rate applies to certain supplies such as some domestic energy, and some supplies are zero-rated or exempt. Zero-rated and exempt are not the same thing for record-keeping.

Choosing a rate here does not determine the correct rate for your supply. If a rate is uncertain, HMRC guidance or an accountant is the right reference.

Registration and schemes

Businesses must register once taxable turnover passes the registration threshold, and can register voluntarily below it. Flat rate, cash accounting and annual accounting schemes each change how VAT is calculated and reported, and are outside what this calculator models.

Calculators for this topic

• VAT calculatorAdd or remove VAT at the standard, reduced or zero rate.