What is VAT and How is it Calculated in the UK?

Value Added Tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain. In the UK, businesses with a turnover exceeding £90,000 must register for VAT and collect it on behalf of HMRC.

Current UK VAT Rates 2026

  • Standard Rate (20%): Applies to most goods and services.
  • Reduced Rate (5%): Applies to some goods and services, such as children’s car seats and home energy.
  • Zero Rate (0%): Applies to most food and children's clothes.

How to Add or Remove VAT Manually

While our tool does the heavy lifting, knowing the formula is useful for any business owner:

To Add 20% VAT: Multiply the amount by 1.20.
To Remove 20% VAT: Divide the amount by 1.20.

Who Needs a VAT Calculator?

This tool is essential for:

  • Freelancers: To ensure invoices include the correct VAT amount.
  • Shoppers: To calculate the base price of a luxury item before tax was added.
  • Small Business Owners: To quickly figure out how much of their daily revenue belongs to HMRC.

Our UK VAT Calculator is updated for the 2026 fiscal year, providing you with instant, error-free calculations every time.