To calculate VAT, multiply a net price by the VAT rate to add it, or divide a gross price by 1 plus the rate to remove it. At the UK standard rate of 20 percent, you multiply by 1.20 to add VAT and divide by 1.20 to strip it out. This guide shows both directions, the VAT fraction shortcut, and the one mistake that understates VAT every time.
Search intent: you have a price and you need the correct net, VAT and gross figures for an invoice, a quote, a receipt or a VAT return, without guessing which formula applies.
Rates last reviewed: October 2026. UK figures follow GOV.UK: the standard rate is 20 percent for most goods and services, the reduced rate is 5 percent for items such as children’s car seats and some energy-saving materials, and the zero rate is 0 percent for items such as most food and children’s clothes (GOV.UK, Tax on shopping and services). The VAT registration threshold has been 90,000 pounds since 1 April 2024 (GOV.UK, Increasing the VAT registration threshold).
How do you calculate VAT?
You calculate VAT from the net price, never from the gross price. Multiply the net amount by the rate as a decimal to find the VAT, then add it for the gross total. To reverse the process, divide the gross amount by 1 plus the rate. That division step is what most errors miss.
Two terms control everything that follows. The net price is the amount before VAT. The gross price is the net price plus VAT. VAT is always a percentage of the net price, so the same rate behaves differently in each direction. Adding 20 percent is straightforward multiplication. Removing it is not subtracting 20 percent, because 20 percent of the gross is larger than the VAT that was added to the smaller net.
If you want the arithmetic checked for you, LancerBill’s VAT calculator shows net, VAT and gross side by side for add and remove modes. Use the formulas below when you need to check a figure by hand, build a spreadsheet, or understand why a supplier invoice looks wrong.
Tip: Decide first whether your starting figure is net or gross. Write that word next to the number before you touch a calculator. Most VAT errors are direction errors, not arithmetic errors.
How do you add VAT to a price?
To add VAT, multiply the net price by 1 plus the rate as a decimal. At 20 percent, multiply by 1.20. At 5 percent, multiply by 1.05. To find the VAT amount on its own, multiply the net price by the rate alone, so net times 0.20 at the standard rate.
Worked example, UK standard rate, 2026/27. You quote 850 pounds net for a piece of freelance design work and you are VAT registered at the standard rate.
- Step 1: VAT amount = 850 x 0.20 = 170 pounds.
- Step 2: Gross price = 850 + 170 = 1,020 pounds.
- Step 3, shortcut check: 850 x 1.20 = 1,020 pounds. The two routes agree.
Your invoice should show the net amount, the VAT amount and the gross total as separate lines. If you build that invoice in the free invoice generator, the VAT line is calculated from the net figures you enter, which keeps the invoice and your return consistent. For the full UK rate list and which supplies sit at each rate, see UK VAT Rates 2026/27: Standard, Reduced and Zero Rates Explained.
How do you remove VAT from a price?
To remove VAT, divide the gross price by 1 plus the rate as a decimal. At 20 percent, divide by 1.20. At 5 percent, divide by 1.05. Then subtract the net result from the gross price to find the VAT included. Never subtract the percentage itself from a gross price. Once you know the method, our VAT ready reckoner gives you VAT on common amounts at 20 and 5 percent at a glance.
Worked example, checking a receipt. A supplier charges you 1,020 pounds including 20 percent VAT and you need the net cost and the reclaimable VAT for your books.
- Step 1: Net price = 1,020 / 1.20 = 850 pounds.
- Step 2: VAT included = 1,020 – 850 = 170 pounds.
- Step 3, check: 850 x 1.20 = 1,020 pounds. You are back at the starting gross figure.
Now compare the wrong method. Subtracting 20 percent from 1,020 pounds gives 816 pounds net and implies 204 pounds of VAT. That overstates the VAT by 34 pounds on a single receipt. Scaled across a quarter of expenses, that error becomes a wrong reclaim and a problem on your return.
| Gross price at 20 percent | Correct VAT (divide method) | Wrong VAT (subtract 20 percent) | Overstatement |
|---|---|---|---|
| 120 pounds | 20.00 pounds | 24.00 pounds | 4.00 pounds |
| 600 pounds | 100.00 pounds | 120.00 pounds | 20.00 pounds |
| 1,200 pounds | 200.00 pounds | 240.00 pounds | 40.00 pounds |
| 6,000 pounds | 1,000.00 pounds | 1,200.00 pounds | 200.00 pounds |
This error-cost table is the quickest way to see why the division method matters. The wrong method always overstates VAT at 20 percent by exactly one fifth of the true VAT amount, because it treats the gross price as if it were the net price.
What is the VAT fraction?
The VAT fraction tells you what share of a gross price is VAT, so you can extract the tax in one step. At 20 percent the fraction is 1/6, so VAT equals the gross price divided by 6. At 5 percent the fraction is 1/21. The general formula is rate divided by 100 plus rate.
HMRC uses the same fraction in its own guidance: for a 20 percent rate, the VAT element is calculated at 1/6th of the value (HMRC internal manual VEXP90600). The fraction works because a gross price at 20 percent contains 120 parts, of which 20 parts are VAT, and 20/120 simplifies to 1/6.
| Rate | Add VAT (net to gross) | Remove VAT (gross to net) | VAT fraction (VAT in gross) |
|---|---|---|---|
| 0 percent (UK zero rate) | x 1.00 | / 1.00 | 0 |
| 5 percent (UK reduced rate) | x 1.05 | / 1.05 | 1/21 |
| 19 percent (Germany) | x 1.19 | / 1.19 | 19/119 |
| 20 percent (UK standard rate) | x 1.20 | / 1.20 | 1/6 |
| 21 percent (Netherlands, Spain) | x 1.21 | / 1.21 | 21/121 |
| 23 percent (Ireland) | x 1.23 | / 1.23 | 23/123 |
Use the fraction when you only need the VAT amount from a gross total, for example when you are extracting output VAT from till receipts or gross sales figures. Use the division method when you need both the net and the VAT figures, because it gives you both in two steps.
Watch out: Do not confuse reverse VAT calculation with the reverse charge. Reverse calculation is arithmetic: backing VAT out of a gross price. The reverse charge is a VAT accounting rule where your customer accounts for the VAT instead of you. They are different things with similar names.
If the reverse charge applies to your work, read Reverse Charge VAT Explained: When Your Client Accounts for the VAT before you invoice, because the invoice wording and the return boxes change.
Worked example: a mixed-rate freelancer invoice, checked both ways
Assumptions: UK freelancer, VAT registered, tax year 2026/27, standard rate 20 percent on professional services. You invoice a client for two lines in one month.
- Line 1: consulting work, 600 pounds net at 20 percent. VAT = 600 x 0.20 = 120 pounds. Gross = 720 pounds.
- Line 2: a second project, 450 pounds net at 20 percent. VAT = 450 x 0.20 = 90 pounds. Gross = 540 pounds.
- Invoice totals: net 1,050 pounds, VAT 210 pounds, gross 1,260 pounds.
Calculate each line separately, then add the lines. Never apply one blended rate to a mixed invoice, and never calculate VAT on the gross total at the end. If a line is reduced-rated or zero-rated, it gets its own multiplier and its own fraction.
Now check the finished invoice backwards, the way your client or your accountant would. Gross 1,260 pounds divided by 1.20 gives 1,050 pounds net. The VAT fraction gives the same tax in one step: 1,260 / 6 = 210 pounds. Net plus VAT, 1,050 + 210, returns to 1,260 pounds. When the forward and backward checks agree, the invoice is internally consistent.
Decision framework: pick your formula by what you start with and what you need.
| You have | You need | Formula at 20 percent |
|---|---|---|
| Net price | Gross price | Net x 1.20 |
| Net price | VAT only | Net x 0.20 |
| Gross price | Net price | Gross / 1.20 |
| Gross price | VAT only | Gross / 6 (the VAT fraction) |
| Net and gross | The rate | (Gross / Net – 1) x 100 |
That last row is useful when a supplier invoice shows net and gross but not the rate. If gross divided by net is 1.20, the rate was 20 percent. If it is 1.05, the rate was 5 percent. If it is neither, query the invoice before you reclaim anything.
If you are on the Flat Rate Scheme, your VAT maths is different: you apply a fixed sector percentage to your gross turnover instead of tracking VAT line by line. Compare the two methods in Flat Rate VAT Scheme vs Standard VAT and run scheme figures in the Flat Rate VAT calculator. If you are not yet registered and are unsure whether you should charge VAT at all, start with Do Freelancers Need to Charge VAT? UK Rules Explained. For non-UK consumption taxes, the same add and divide logic applies in the GST calculator at that country’s rate.
What mistakes make VAT calculations wrong?
The mistakes that make VAT calculations wrong are subtracting the rate from a gross price, using the wrong rate for the supply, rounding each line differently, and applying VAT to a total that already includes it. Each one produces a plausible looking figure that fails a backward check, so always reverse your result to test it.
- Subtracting instead of dividing. Covered above. It overstates VAT every time at every rate.
- Wrong rate for the item. Most UK goods and services are standard-rated at 20 percent, but some are reduced-rated, zero-rated or exempt. Zero-rated and exempt are not the same: zero-rated sales count towards the 90,000 pound registration threshold and related input VAT is reclaimable, while exempt sales do not count and related input VAT usually cannot be reclaimed.
- Double counting VAT. If a quote was given VAT inclusive and you multiply by 1.20 again, you have charged VAT on VAT. Label every quote as including VAT or excluding VAT.
- Rounding drift. Calculate VAT per line, round to the nearest penny, then sum the lines. Rounding only at the total can leave a penny difference between your invoice and your return.
- Skipping the backward check. Divide your gross result by 1 plus the rate. If you do not land back on your starting net figure, the calculation is wrong, whatever the spreadsheet says.
Rule of thumb: VAT lives on the net price. Add it with multiplication, remove it with division, and extract it with the fraction. If a method starts by taking a percentage of a gross price, it is the wrong method.
Key takeaways
- Add VAT by multiplying the net price by 1 plus the rate: x 1.20 at 20 percent, x 1.05 at 5 percent.
- Remove VAT by dividing the gross price by the same multiplier. Never subtract the percentage from a gross price.
- The VAT fraction extracts VAT from a gross price in one step: divide by 6 at 20 percent, by 21 at 5 percent.
- Calculate mixed-rate invoices line by line, then check the total backwards before you send it.
- UK rates are 20 percent standard, 5 percent reduced and 0 percent zero, with a 90,000 pound registration threshold.
- Use LancerBill’s VAT calculator to verify hand calculations when the figure feeds an invoice or a return.
Frequently asked questions
How do I calculate 20 percent VAT quickly?
Multiply the net price by 0.20 for the VAT amount, or by 1.20 for the gross price including VAT. For example, 250 pounds net gives 50 pounds of VAT and a 300 pound gross price. To go backwards from 300 pounds gross, divide by 1.20 to return to 250 pounds net.
What is the VAT on 1,000 pounds?
It depends whether 1,000 pounds is net or gross. If it is net at 20 percent, the VAT is 200 pounds and the gross price is 1,200 pounds. If 1,000 pounds already includes VAT at 20 percent, the VAT inside it is 166.67 pounds (1,000 / 6) and the net price is 833.33 pounds.
Why is the VAT fraction 1/6 at 20 percent?
Because a gross price at 20 percent is made of 120 parts: 100 parts net plus 20 parts VAT. The VAT share is 20/120, which simplifies to 1/6. So one sixth of any standard-rated gross price is its VAT content, a shortcut HMRC also uses in its guidance.
How do I remove 5 percent VAT from a price?
Divide the gross price by 1.05 to get the net price, then subtract to find the VAT. The VAT fraction at 5 percent is 1/21, so you can also divide the gross price by 21 to get the VAT directly. For example, 210 pounds gross divided by 21 gives 10 pounds of VAT and a 200 pound net price.
Do I calculate VAT per line or on the invoice total?
Calculate VAT per line, especially when lines carry different rates, then add the lines for the invoice totals. Per-line calculation keeps reduced-rated and zero-rated items correct and matches how your VAT return is built. Round each line to the nearest penny to avoid rounding drift.
Is reverse VAT calculation the same as the reverse charge?
No. Reverse VAT calculation is the arithmetic of backing VAT out of a gross price by dividing by 1 plus the rate. The reverse charge is an accounting rule, common in construction and cross-border services, where the customer accounts for the VAT instead of the supplier charging it.
This guide is for general information only and is not financial, tax or legal advice.