What is the UK VAT rate in 2025?

The standard UK VAT rate is 20%. There's also a reduced rate of 5% for certain goods and services, and a zero rate (0%) for essential items like most food and children's clothing.

How do I add 20% VAT to a price?

To add 20% VAT, multiply the net price by 1.20. For example, £100 × 1.20 = £120 including VAT.

How do I remove VAT from a price?

To remove 20% VAT from a gross price, divide by 1.20. For example, £120 ÷ 1.20 = £100 net price.

What is the VAT registration threshold in 2025?

From April 2024, the VAT registration threshold is £90,000. Businesses with taxable turnover exceeding this must register for VAT.

UK VAT Calculator Guide 2025: Add or Remove VAT Explained

Last updated: February 2026 | 10 min read

Value Added Tax (VAT) is a consumption tax added to most goods and services in the UK. Whether you're a business owner calculating prices or a consumer wanting to understand what you're paying, this guide explains everything about UK VAT in 2025.

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UK VAT Rates in 2025

The UK has three VAT rates that apply to different types of goods and services:

Rate	Percentage	Applies To
Standard Rate	20%	Most goods and services
Reduced Rate	5%	Home energy, children's car seats, sanitary products
Zero Rate	0%	Most food, children's clothing, books, newspapers

How to Add VAT to a Price

When you need to calculate the VAT-inclusive price from a net (ex-VAT) price:

Price including VAT = Net Price × 1.20
(for 20% VAT)

Example: Adding 20% VAT

Your product costs £100 before VAT:

£100 × 1.20 = £120 including VAT
VAT amount = £100 × 0.20 = £20

Quick VAT Addition Table

Net Price	VAT (20%)	Gross Price
£50	£10	£60
£100	£20	£120
£250	£50	£300
£500	£100	£600
£1,000	£200	£1,200
£5,000	£1,000	£6,000

How to Remove VAT from a Price

When you have a VAT-inclusive price and need to find the net amount:

Net Price = Gross Price ÷ 1.20
VAT Amount = Gross Price - Net Price
(for 20% VAT)

Example: Removing 20% VAT

A product costs £120 including VAT:

£120 ÷ 1.20 = £100 net price
VAT amount = £120 - £100 = £20

Common Mistake!

Don't calculate VAT by taking 20% off the gross price! £120 - 20% = £96, which is wrong.

Always divide by 1.20 (or multiply by 100/120) to get the correct net price of £100.

VAT for Different Rates

Here are the formulas for all VAT rates:

VAT Rate	Add VAT (Multiply by)	Remove VAT (Divide by)
20% Standard	× 1.20	÷ 1.20
5% Reduced	× 1.05	÷ 1.05
0% Zero Rate	× 1.00	÷ 1.00

VAT Registration Threshold 2025

From 1 April 2024, the VAT registration threshold increased:

Current VAT Thresholds (2025/26)
Registration threshold: £90,000 (taxable turnover in 12 months)
Deregistration threshold: £88,000

You must register for VAT if:

Your VAT taxable turnover exceeds £90,000 in any 12-month period
You expect your turnover to exceed £90,000 in the next 30 days alone

Voluntary VAT Registration

Even below the threshold, you can voluntarily register for VAT. This allows you to reclaim VAT on business purchases and can make your business appear more established. However, you'll need to charge VAT to customers and complete quarterly VAT returns.

What is VAT Exempt vs Zero-Rated?

These terms are often confused but have different implications:

Type	VAT Charged	Claim Back VAT?	Examples
Zero-Rated	0%	Yes, on inputs	Most food, children's clothes, books
Exempt	None	No	Insurance, education, health services
Outside Scope	N/A	No	Wages, dividends, donations

Items at Different VAT Rates

Standard Rate (20%)

Most consumer goods (electronics, clothing for adults, cars)
Professional services (accountancy, legal, consulting)
Restaurant meals and takeaway hot food
Alcohol and tobacco
Confectionery and ice cream

Reduced Rate (5%)

Domestic gas and electricity
Children's car seats
Sanitary products
Energy-saving materials (installation)
Mobility aids for the elderly

Zero Rate (0%)

Most food (except restaurant meals, confectionery, alcohol)
Children's clothing and footwear
Books, newspapers, magazines
Public transport
Prescription medicines
Exports to non-EU countries

VAT on Invoices

If you're VAT registered, your invoices must show:

Your VAT registration number
The date of supply (tax point)
Unique invoice number
Your business name and address
Customer's name and address
Description of goods/services
Net amount (excluding VAT)
VAT rate(s) applied
Total VAT amount
Gross total (including VAT)

VAT Return Deadlines

Most VAT-registered businesses file quarterly returns:

Key Deadlines
Return filing: Within 1 month and 7 days after the quarter end
Payment: Same deadline as the return
Method: Most businesses must use Making Tax Digital (MTD) software

Reclaiming VAT on Business Expenses

VAT-registered businesses can reclaim VAT on:

Stock and raw materials
Business equipment (computers, machinery, furniture)
Office supplies
Professional services (accountancy, legal fees)
Business travel expenses
Business vehicle costs (with restrictions)

You Cannot Reclaim VAT On:

Business entertainment
Items for personal use
Purchases without valid VAT invoices
Non-business expenditure

VAT Flat Rate Scheme

Small businesses (turnover under £150,000) can use the Flat Rate Scheme, which simplifies VAT by applying a fixed percentage to total turnover:

Instead of calculating exact VAT on each transaction, you pay a set percentage (varies by industry, typically 8-14.5%) of your gross turnover to HMRC.

Benefit: Less paperwork and potentially keeping the difference.

Drawback: Cannot reclaim VAT on most purchases.

Using Our VAT Calculator

Our free VAT calculator handles all these calculations instantly. Simply:

Enter your amount
Select whether it includes or excludes VAT
Choose the VAT rate
Get instant results showing net, VAT, and gross amounts

Calculate VAT Now

Try our free UK VAT Calculator for instant results!

Conclusion

Understanding VAT is essential for UK businesses and helpful for consumers. The standard rate of 20% applies to most goods and services, with reduced (5%) and zero (0%) rates for specific items.

Key formulas to remember:

Add VAT: Net × 1.20 = Gross
Remove VAT: Gross ÷ 1.20 = Net
VAT amount: Net × 0.20 = VAT

For quick calculations, our VAT Calculator is always available.

UK VAT: Important Facts and Figures

Value Added Tax is one of the UK Government's largest revenue sources, generating approximately 161 billion pounds in the 2023-24 financial year according to HMRC statistics. The standard rate of 20% has remained unchanged since January 2011, when it was raised from 17.5%. There are currently around 2.5 million VAT-registered businesses in the UK, and any business with taxable turnover exceeding the VAT registration threshold of 90,000 pounds (from April 2024) must register for VAT.

The UK operates a destination-based VAT system, meaning exports are zero-rated while imports are subject to VAT. Following Brexit, goods imported from the EU became subject to import VAT for the first time since 1993. For small online retailers selling to UK consumers, the rules changed significantly: overseas sellers must now register for UK VAT if their goods are valued at 135 pounds or less, with online marketplaces responsible for collecting VAT on behalf of sellers in many cases. The Making Tax Digital programme requires all VAT-registered businesses to keep digital records and submit VAT returns using compatible software, a requirement that became mandatory for all VAT-registered businesses from November 2022.

Frequently Asked Questions About UK VAT

Do I need to register for VAT if my turnover is below the threshold?

No, VAT registration is only mandatory when your taxable turnover exceeds 90,000 pounds in any rolling 12-month period (as of April 2024). However, you can voluntarily register at any turnover level. Voluntary registration can be beneficial if you sell mainly to VAT-registered businesses, as it allows you to reclaim VAT on your business purchases. The trade-off is the administrative burden of submitting quarterly VAT returns and maintaining compliant digital records under Making Tax Digital rules.

What is the VAT Flat Rate Scheme and who can use it?

The VAT Flat Rate Scheme is a simplified method where you pay a fixed percentage of your gross turnover to HMRC instead of calculating the difference between output and input VAT. The percentage varies by business sector, ranging from 4% for retailing food to 14.5% for computer and IT consultancy. You can join the scheme if your VAT-taxable turnover is 150,000 pounds or less (excluding VAT). New businesses in their first year of VAT registration receive a 1% discount on the flat rate. While simpler, the scheme may not suit businesses with significant VAT-eligible purchases.

Can I claim VAT back on business expenses in the UK?

Yes, if you are VAT-registered and use the standard VAT accounting method, you can reclaim VAT (input tax) on most business-related purchases. This includes office supplies, professional services, equipment, and business travel. However, there are exceptions: you cannot reclaim VAT on business entertainment, company cars (unless used exclusively for business), or goods purchased for personal use. You must hold valid VAT invoices as evidence. For purchases under 250 pounds, a simplified VAT invoice is acceptable; for larger amounts, a full VAT invoice showing the supplier's VAT number is required.

UK Calculator Financial Team

Our team of financial experts creates accurate, easy-to-use calculators and guides to help you make informed decisions about your money.

James Mitchell, ACCA

Chartered Accountant & Former HMRC Advisor

James is a Chartered Certified Accountant (ACCA) specialising in UK personal taxation and financial planning. With over 12 years in practice and a background as a former HMRC compliance officer, he brings authoritative insight to complex tax topics.

VAT Calculator Guide: Add or Remove VAT Explained