UK VAT Calculator
How we maintain accuracy
We cross-reference HMRC VAT Notice 700 and the Finance Act, and update rates within 7 days of any HMRC publication. Calculator values follow standard UK rounding to the nearest penny. The author reviews this page quarterly and after every HMRC rate change.
Quick reference: UK VAT rates
Three rates plus an exempt category cover almost every UK supply. Use this table as the first check on any new transaction.
| Rate | What it applies to | Examples |
|---|---|---|
| 20% Standard | Default rate for most goods and services | Adult clothing, electronics, alcohol, professional services, restaurant meals, hotel stays |
| 5% Reduced | Specific categories listed in VAT Notice 701 | Domestic gas and electricity, children's car seats, mobility aids for over-60s installed in the home, women's sanitary products, smoking cessation products |
| 0% Zero-rated | Taxable at 0% — still allows input VAT reclaim | Most food and drink, books and newspapers, children's clothing and footwear, public transport, new-build housing, prescription drugs |
| Exempt | Outside the VAT system — no charge, no reclaim | Education, healthcare from registered professionals, insurance, postage stamps, betting and gaming, most financial services |
VAT registration threshold
The threshold is £90,000 of taxable turnover in any rolling 12-month period. It rose from £85,000 on 1 April 2024. The figure is set out in VAT Notice 700/1 and reviewed each Budget.
"Rolling 12 months" matters more than people expect. It is not a tax year window. At the end of every month, add up your taxable sales for the previous 12 months. The moment that figure passes £90,000, you must register within 30 days. The clock starts the day you crossed the line, not the day you noticed.
A second rule runs in parallel. If at any point you reasonably expect taxable turnover to exceed £90,000 in the next 30 days alone, you must register immediately. A construction firm signing a single £100,000 contract triggers this rule on the day of signing — well before invoices go out. Forward-looking registration takes effect from the day the expectation arose.
Taxable turnover means the total value of standard-rated, reduced-rated, and zero-rated supplies. Exempt supplies do not count. So a financial adviser with £200,000 of exempt insurance commission and £50,000 of standard-rated consultancy does not need to register on turnover alone.
Voluntary registration below the threshold is permitted and often sensible. If most customers are themselves VAT-registered, they can reclaim the VAT you charge them — so registering early lets you reclaim your own input VAT on rent, stock, and equipment with no net cost to anyone. For businesses with mainly consumer customers, voluntary registration adds 20% to prices and rarely pays.
The deregistration threshold sits at £88,000. You can deregister voluntarily if you can show turnover will stay below that figure for the next 12 months. Register online via gov.uk using your Government Gateway account.
VAT schemes
HMRC offers several accounting schemes that change how and when VAT is paid. The right choice depends on cash flow, turnover, and how much you spend on goods.
Standard accounting (invoice basis)
The default scheme. VAT is accounted for on the date of the invoice, not the date of payment. You owe HMRC the output VAT on your sales whether or not the customer has paid. You can reclaim input VAT on purchase invoices the moment you receive them. Suited to businesses with reliable customer payment cycles.
Cash accounting scheme
Available if taxable turnover is under £1.35 million. VAT is accounted for on the date money is received or paid, not the invoice date. This gives an immediate cash-flow benefit if customers are slow to pay — you do not have to fund the VAT before they pay you. You stay on the scheme until turnover passes £1.6 million in any rolling 12-month period. HMRC VAT Notice 731 sets out the detail.
Flat Rate Scheme
Available if turnover is under £150,000. You apply a single flat percentage to your gross sales each quarter and pay that to HMRC. You do not reclaim input VAT separately (apart from capital purchases over £2,000). The flat rate depends on your business sector — between 4% and 16.5%.
Annual accounting scheme
Available if turnover is under £1.35 million. You file one VAT return a year instead of four, with monthly or quarterly interim payments based on the prior year. The balance is settled with the annual return. Reduces admin but ties up cash. Best for businesses with steady, predictable VAT bills.
Margin schemes
The Second-Hand Margin Scheme charges VAT on the profit margin only, not the full selling price. It applies to used goods, antiques, art, and collectors' items where the seller could not reclaim input VAT — usually because the item was bought from a private individual. VAT equals (selling price − purchase price) × 1/6 at the standard rate. You must keep a stock book recording every item bought and sold. Cars sold by used-car dealers are the most common application.
Postponed VAT Accounting (PVA)
Before Brexit, EU imports moved freely with no import VAT. After Brexit, all imports — EU and rest of world — attract UK import VAT at the standard rate on the customs value plus duty. Paying that at the border tied up cash for VAT-registered importers.
Postponed VAT Accounting fixes the cash-flow problem. Instead of paying import VAT at the border, you declare it on your next VAT return as both an output (Box 1) and an input (Box 4). For a fully taxable business, the two entries cancel out and no cash leaves the bank.
To use PVA, the importer (or their freight agent) ticks the PVA box on the customs declaration (CHIEF or CDS). Each month HMRC publishes a Monthly Postponed Import VAT Statement (MPIVS) on the Customs Declaration Service portal — that statement shows the figures to enter in Boxes 1 and 4.
PVA is optional, not mandatory. Most VAT-registered importers use it. Non-VAT-registered importers cannot use it and must pay import VAT at the border. Partially exempt businesses can still use PVA but only reclaim a proportion in Box 4.
Reclaiming VAT
Input VAT is reclaimable when the purchase is used for taxable business activity and you hold a valid VAT invoice. Several specific rules apply.
Pre-registration reclaim
Goods bought up to 4 years before registration are reclaimable if they are still held at the registration date. Services received in the 6 months before registration are reclaimable. Stock sold before registration cannot be reclaimed.
Partial exemption and de minimis
If you make both taxable and exempt supplies, you can only reclaim the input VAT linked to the taxable side. Direct attribution comes first; mixed-use VAT is apportioned using the standard method (usually a turnover-based ratio). A de minimis exception allows full reclaim of all exempt-related input VAT if it averages under £625 a month and is no more than half of total input VAT.
Capital Goods Scheme
Applies to land and buildings over £250,000, computer hardware over £50,000, and aircraft, ships, boats and other vessels over £50,000. The input VAT is adjusted over 5 or 10 years to track changes in taxable use.
Car leases and entertainment
For cars, the 50% lease block applies — only half the VAT on lease rentals is reclaimable. Purchase VAT is fully blocked unless the car is for exclusive business use. Staff entertainment VAT is fully reclaimable; client entertainment is fully blocked. Mixed staff-and-client events are apportioned.
Mobile phones and mileage
Business mobile phone VAT is reclaimable in full if the phone is wholly for business; if there is private use, the private element is treated as a benefit in kind and the VAT is still reclaimable but the private use is taxed. Business mileage VAT on fuel reclaims uses the quarterly HMRC advisory fuel rates — check the latest figures each quarter.
Bad debt relief
If a customer fails to pay, you can reclaim the VAT you already accounted for to HMRC. Three conditions must all be met:
- The debt is at least 6 months overdue from the date payment was due (not the invoice date).
- The debt has been written off in your accounts.
- You did not sell the debt on to a third party.
The claim sits in Box 4 of the return for the period in which the conditions are met. You have 4 years and 6 months from the original due date to make the claim. If the customer pays later, you must repay the VAT to HMRC in the next return. Bad debt relief is one of the most commonly missed reclaims.
VAT invoices
A valid VAT invoice is the document a customer uses to support their own input VAT claim. Missing or wrong fields invalidate the invoice.
Full VAT invoice — required fields
- Sequential invoice number
- Date of issue and tax point (if different)
- Your name, address, and VAT registration number
- Customer's name and address
- Description of goods or services, quantity, and unit price excluding VAT
- Rate of VAT and VAT amount per line
- Total net amount, total VAT amount, and total gross amount
- Reference to any zero-rated or exempt supplies
Simplified invoice (under £250)
For retail sales under £250 gross, a simplified VAT invoice is allowed. It must show your name, address, and VAT number, the date, a description of the goods, the rate of VAT, and the total amount including VAT. Most petrol-station receipts and till slips already meet this format.
Making Tax Digital (MTD)
MTD has been mandatory for all VAT-registered businesses since April 2022, regardless of turnover. Records must be kept digitally and returns filed through MTD-compatible software via API.
Approved software
HMRC publishes the approved list. Widely used options include:
- Xero — full-featured accounting, MTD-ready
- QuickBooks Online — strong with multi-currency and payroll
- FreeAgent — free for NatWest, RBS, and Mettle business customers
- Sage Business Cloud — established UK option for SMEs
- Zoho Books — competitive pricing for smaller businesses
- Bridging software (TaxCalc, Easy MTD, VitalTax) for spreadsheet users
Digital record-keeping requirements
You must keep digital records of: business name and address, VAT registration number, VAT scheme used, the date and value of every sale and purchase, the rate of VAT, and the time of supply. Records must be kept for 6 years. Spreadsheets are allowed if linked to bridging software — manual re-keying breaks the digital link and falls foul of MTD rules.
Read the HMRC MTD for VAT guidance for the current rules and software list.
Penalties and error correction
Late registration penalty
The failure-to-notify penalty is a percentage of the VAT due since the date you should have registered:
- 0–30% for non-deliberate, unprompted disclosure
- 10–30% for non-deliberate, prompted
- 20–70% for deliberate but not concealed
- 30–100% for deliberate and concealed
HMRC also recovers the back-dated VAT plus interest. Unprompted disclosure — telling HMRC before they ask — produces the lowest penalty.
Error correction
Net errors under £10,000 (or under 1% of Box 6 turnover, capped at £50,000) can be corrected on the next VAT return. Larger errors must be reported separately on form VAT652. Deliberate errors must be disclosed however small. Errors beyond 4 years are time-barred and cannot be corrected.
Points-based late filing
The points-based penalty system replaced the old default surcharge in January 2023. One point per late return. Once you hit the threshold (4 points for quarterly filers, 5 for monthly, 2 for annual), a £200 penalty applies, plus £200 for each subsequent late return. Points expire after 24 months of full compliance.
Deregistration
You must deregister if you stop making taxable supplies, sell or close the business, or change legal entity (e.g., sole trader to limited company). Notify HMRC within 30 days using form VAT7 online.
You can deregister voluntarily if expected taxable turnover for the next 12 months will be under £88,000. The decision is irreversible for at least 12 months unless circumstances change.
On deregistration, you must account for VAT on the market value of any business assets still on hand — stock, plant, equipment, vehicles — if the total VAT due would exceed £1,000. This catches businesses that built up stock pre-deregistration to avoid the final VAT charge.
Common VAT mistakes
- Confusing zero-rated and exempt supplies. Zero-rated sales count toward the registration threshold and let you reclaim input VAT. Exempt sales do neither. Misclassifying them distorts both threshold tracking and reclaim calculations.
- Claiming VAT on client entertainment. Blocked in full. Staff entertainment is reclaimable. Mixed events need to be split by attendee.
- Treating disbursements as recharges. A true disbursement (paid on the customer's behalf, in the customer's name) is outside VAT. A recharge of your own expense carries your VAT. Mislabelling under-declares output VAT.
- Choosing the Flat Rate Scheme without modelling. Limited cost traders pay 16.5% on gross and almost always lose money. Always compare against standard accounting using last year's actual figures.
- Missing the pre-registration claim. Goods bought up to 4 years before registration and services up to 6 months before are reclaimable on the first return. Many new registrants forget.
- Forgetting the construction reverse charge. Domestic reverse charge applies to most CIS-registered construction services since March 2021. The supplier does not charge VAT; the customer accounts for it on their own return.
- Claiming bad debt relief too early. The debt must be at least 6 months overdue and written off in the accounts. Claiming earlier invalidates the reclaim.
- Reclaiming 100% VAT on a car with any private use. Even commuting counts as private use and blocks the reclaim. The 50% block on car leases is a separate rule.
- Skipping partial exemption. Any exempt income above the £625/month de minimis triggers a partial exemption calculation. Ignoring it leads to over-reclaim and a future penalty.
- Wrong place of supply for services. B2B services to overseas customers are generally outside UK VAT. B2C digital services follow the consumer's country. Charging UK VAT when you shouldn't is a common refund headache.
- Missing fields on a VAT invoice. Without a VAT number, invoice number, or rate breakdown, the invoice is invalid and your customer cannot reclaim. Software-generated invoices usually pass; PDF templates often fail.
- Filing outside MTD-compatible software. Manual entry into the HMRC portal is no longer accepted. A return that does not come through an API submission is treated as not filed.
- Using last year's fuel scale charge or AFR rate. Both update quarterly. Old figures under-claim mileage VAT or wrongly compute fuel scale charges.
Quirky VAT classifications
UK VAT case law is famous for its odd dividing lines between zero-rated food and standard-rated luxuries. These cases come up in real audits and shape current HMRC practice.
The Jaffa Cake test
McVitie's v HMRC (1991) is the textbook case. HMRC argued Jaffa Cakes were chocolate-covered biscuits (standard-rated). McVitie's argued they were cakes (zero-rated). The tribunal sided with McVitie's. The deciding factor: a Jaffa Cake goes hard when stale; a biscuit goes soft. Cake-versus-biscuit fights still cite this case.
The hot pasty rule
Cold or "ambient" pasties are zero-rated. Pasties sold hot — kept warm under heat lamps, or freshly baked and sold straight from the oven — are standard-rated as hot takeaway food. The 2012 "pasty tax" controversy stemmed from a tightening of this rule.
Sandwich vs hot food
A cold sandwich, even a chicken-and-bacon one, is zero-rated food. Toast that same sandwich in a panini press and it becomes hot takeaway, attracting 20% VAT. The same applies to soup served hot vs sold cold for reheating.
Gingerbread man chocolate eyes
A gingerbread man with two small chocolate dots for eyes is zero-rated. Add chocolate buttons down the front and it is reclassified as a chocolate biscuit — standard-rated at 20%. HMRC's published guidance literally counts the chocolate decoration.
Worked examples
Example 1 — Add 20% VAT to £100 net
Net: £100.00
VAT (20%): £100.00 × 0.20 = £20.00
Gross: £100.00 + £20.00 = £120.00
Invoice line: Net £100.00, VAT @ 20%: £20.00, Gross £120.00
Example 2 — Remove 20% VAT from £120 gross
Gross: £120.00
Net: £120.00 ÷ 1.20 = £100.00
VAT: £120.00 − £100.00 = £20.00 (or £120.00 × 1/6 = £20.00)
The "VAT fraction" at 20% is 1/6. Multiply any gross figure by 1/6 to extract the VAT directly.
Example 3 — VAT at the reduced 5% rate on a £500 net invoice
Net: £500.00
VAT (5%): £500.00 × 0.05 = £25.00
Gross: £525.00
Reduced rate applies to supplies like home energy, children's car seats, and mobility aids installed for someone over 60.
Example 4 — Flat Rate Scheme calculation for a consultant
Annual turnover (net): £80,000. Sector: Management consultancy. Flat rate after year 1: 14%.
VAT charged to clients (at 20%): £80,000 × 0.20 = £16,000
Total gross invoiced: £96,000
VAT owed under FRS: £96,000 × 14% = £13,440
Apparent surplus: £16,000 − £13,440 = £2,560 retained
Limited cost trader check: If purchases of goods are below 2% of turnover (£1,600) or under £1,000 a year, the rate becomes 16.5%. VAT owed would then be £96,000 × 16.5% = £15,840 — leaving only £160 surplus. Most consultants fail the test and are no better off than under standard accounting.
Example 5 — Mixed-rate invoice (some items 20%, some 5%)
Line 1: Adult clothing — Net £200.00, VAT @ 20% = £40.00, Gross £240.00
Line 2: Children's car seat — Net £150.00, VAT @ 5% = £7.50, Gross £157.50
Invoice totals:
Net £350.00
VAT £47.50
Gross £397.50
Each line on a mixed-rate invoice must show its own VAT rate and amount. The customer's accounting software needs the breakdown to post the input VAT correctly.
Frequently asked questions
How do I add 20% VAT to a price?
Multiply the net price by 1.20. £100 × 1.20 = £120 gross. The £20 added is the VAT.
For any rate, multiply by (1 + rate ÷ 100). At 5%, multiply by 1.05. The shortcut works because VAT is a fixed percentage of the net price, not the gross. On an invoice, calculate VAT to the nearest penny on each line before adding to the gross total. Use the standard rate of 20% unless the supply is specifically reduced-rate or zero-rated under HMRC VAT Notice 701.
How do I remove VAT from a gross price?
Divide the gross by 1.20 to find the net. £120 ÷ 1.20 = £100. The £20 difference is the VAT.
To extract just the VAT portion from a gross figure, use: Gross × 20 ÷ 120. So £120 × 20 ÷ 120 = £20. For a reduced-rate supply, divide by 1.05 instead. The VAT fraction at 20% is 1/6 — multiply the gross by 1/6 to get the VAT directly. At 5%, the VAT fraction is 1/21.
What is the current UK VAT rate?
UK VAT has three rates in 2026: 20% standard, 5% reduced, and 0% zero-rated.
Most goods and services are 20%. The 5% rate covers home energy, children's car seats, mobility aids for over-60s, and women's sanitary products. Zero-rated supplies include most food, books, children's clothing, and public transport. A separate "exempt" category covers education, healthcare, insurance, and postage stamps. Zero-rated and exempt look similar but differ in how a business reclaims input VAT.
When do I have to register for VAT?
When taxable turnover in any rolling 12-month period passes £90,000, or when you expect to pass £90,000 in the next 30 days alone.
Register within 30 days of crossing either threshold. HMRC will backdate registration if you miss it and add penalties plus interest. The rolling 12-month test runs every month, not by tax year. Voluntary registration is allowed below £90,000 and lets you reclaim input VAT — sensible if your customers are themselves VAT-registered businesses.
What is the VAT registration threshold for 2026?
£90,000 of taxable turnover in any rolling 12-month period. The deregistration threshold is £88,000.
The figure rose from £85,000 on 1 April 2024. Taxable turnover means total sales of standard, reduced, and zero-rated supplies — not exempt supplies. The 30-day forward-looking rule applies separately: if you reasonably expect to exceed £90,000 in the next 30 days alone, you must register immediately, even if your past 12 months were well below.
Can I reclaim VAT before I'm registered?
Yes — goods held at registration date (bought up to 4 years before) and services received in the 6 months before registration.
The purchase must have been used for business and you must hold a valid VAT invoice. Pre-registration claims go on your first VAT return as input tax. Stock sold before registration cannot be reclaimed. Keep original receipts — HMRC will ask for them in a compliance check. The 4-year/6-month rule is one of the most commonly missed reclaims.
What is the Flat Rate Scheme and is it worth it?
A scheme for businesses under £150,000 turnover. You apply a flat percentage (4–16.5%) to gross sales instead of tracking input VAT.
The rate depends on your sector. Limited cost traders (spending under 2% of turnover or less than £1,000 a year on goods) must use 16.5%, which usually wipes out the benefit. The scheme suits low-cost service businesses with simple records, but rarely benefits trades that buy a lot of materials. Always model against standard accounting before joining.
What's the difference between zero-rated and VAT exempt?
Zero-rated supplies are taxable at 0% and let you reclaim input VAT. Exempt supplies sit outside the VAT system entirely.
A bookshop sells zero-rated books and reclaims its rent VAT in full. A private dentist makes exempt supplies and cannot reclaim VAT on equipment. Businesses making a mix of taxable and exempt supplies fall under partial exemption rules. Zero-rated sales also count toward the registration threshold; exempt sales do not.
Do I charge VAT to EU customers post-Brexit?
Most B2B sales of goods to the EU are zero-rated; the EU customer accounts for VAT under reverse charge. Digital services follow the consumer's country.
For B2C sales of goods above €150, the OSS (One-Stop Shop) or IOSS schemes apply. Confirm EU VAT numbers on the VIES database before zero-rating. Digital services to EU consumers are taxed at the customer's local rate — use the non-Union OSS to file a single quarterly return covering all EU sales.
Can I reclaim VAT on a car?
Only if the car is used exclusively for business. Any private use, including commuting, blocks the full reclaim.
Qualifying cases are narrow: taxis, driving school cars, hire fleets, or pool cars with strict logs. For car leases, the 50% block applies — you reclaim half the VAT on monthly lease payments regardless. Fuel costs follow the road fuel scale charge if there is private use. Vans and other commercial vehicles have no such restriction and qualify for full reclaim.
How does the Margin Scheme work?
VAT is charged on the profit margin only, not the full selling price. VAT = (selling price − purchase price) × 1/6 at the 20% rate.
It applies to second-hand goods, antiques, works of art, and collectors' items where the seller could not reclaim input VAT — usually because the item was bought from a private individual. Keep a stock book recording every item bought and sold. The Global Accounting Scheme is a simpler variant for low-value bulk items where individual tracking is impractical.
What is Postponed VAT Accounting?
PVA lets UK importers account for import VAT on the VAT return rather than paying it at the border.
The same amount goes in Box 1 (output) and Box 4 (input), making it cash-neutral for fully taxable businesses. Use PVA by ticking the option on the customs declaration. The monthly Postponed Import VAT Statement from the CDS portal shows the figures to enter. PVA is essential for cash flow if you import regularly. Non-VAT-registered importers cannot use it.
How do I correct a VAT return error?
Net errors under £10,000 (or under 1% of Box 6, capped at £50,000) can be corrected on the next return. Larger errors need form VAT652.
Enter the correction in Box 1 or Box 4 of the next return. Deliberate errors must always be disclosed regardless of size. Errors discovered after 4 years cannot be corrected. Keep a working paper showing how you calculated each adjustment — HMRC will request it in any compliance check.
What are the penalties for late VAT registration?
A failure-to-notify penalty between 0% and 100% of the VAT owed, plus back-dated VAT and interest.
Non-deliberate cases typically sit at 10–30%. Deliberate concealment can reach 100%. Unprompted disclosure — telling HMRC before they ask — produces the lowest penalty rate. Get an accountant's letter of engagement before approaching HMRC if amounts are significant. The clock runs from the day you crossed the threshold, not the day you noticed.
Is Making Tax Digital mandatory?
Yes — for all VAT-registered businesses since April 2022, regardless of turnover.
You must keep digital records and file returns through MTD-compatible software via API. HMRC publishes the approved list (Xero, QuickBooks, FreeAgent, Sage, Zoho, and others). Spreadsheets are allowed if linked to bridging software. Manual entry into the HMRC portal is no longer permitted. MTD for Income Tax Self Assessment starts April 2026 for sole traders and landlords over £50,000.
Sources and references
- HMRC VAT Notice 700 — The VAT Guide — the master reference for UK VAT.
- HMRC VAT Notice 700/1 — Who should register for VAT — threshold and registration rules.
- HMRC VAT Notice 733 — Flat Rate Scheme — sector percentages and limited cost trader rules.
- HMRC VAT Notice 731 — Cash Accounting Scheme.
- HMRC — Making Tax Digital for VAT — record-keeping and software requirements.
- HMRC — VAT rates on different goods and services.
- gov.uk — Register for VAT — the online registration portal.
- ACCA Professional Insights — practitioner-level VAT analysis.
- CIMA Insights — management accounting perspective on VAT.
Related UK VAT calculators
Specialised tools for specific VAT calculations. Each links back here for the general add/remove operation.