Free calculator
UK VAT calculator.
Enter an amount, say whether it already includes VAT and choose the rate. The calculator shows the net price, the VAT and the gross price at the UK standard, reduced or zero rate.
In short
To add VAT at 20%, multiply the net price by 1.2, so £50 becomes £60. To remove VAT from a price that includes it, divide by 1.2: £60 ÷ 1.2 = £50, so the VAT is £10. Do not take 20% off the gross price, because that gives £48 and understates the net. For the 5% rate, use 1.05.
The VAT formulas
Write the rate as a decimal first: 20% is 0.2 and 5% is 0.05. Then:
- Add VAT: gross = net × (1 + rate). At 20%, net × 1.2.
- VAT on a net price: VAT = net × rate. At 20%, net × 0.2.
- Remove VAT (reverse VAT): net = gross ÷ (1 + rate). At 20%, gross ÷ 1.2.
- VAT inside a gross price: VAT = gross − net. At 20% that is gross ÷ 6; at 5% it is gross ÷ 21.
Tip. Check whether a figure is net or gross before you start. Supplier price lists for trade customers usually show prices before VAT, while shelf prices shown to shoppers normally include it.
A worked example
A hardware shop buys a cordless drill from its supplier for £85 plus VAT and sells it for £119.99 on the shelf.
- VAT on the purchase: £85 × 0.2 = £17.00, so the supplier's invoice is £102.00.
- Net selling price: £119.99 ÷ 1.2 = £99.99.
- VAT in the sale: £119.99 − £99.99 = £20.00. As a check, £119.99 ÷ 6 also rounds to £20.00.
- Gross profit before VAT: £99.99 − £85.00 = £14.99.
Taking 20% off £119.99 instead would give £95.99, which understates the net price by £4.00. At the 5% reduced rate the method is the same with 1.05: a child's car seat sold for £126.00 including VAT is £120.00 net, with £6.00 of VAT.
UK VAT rates: 20%, 5% and 0%
According to GOV.UK's VAT rates page, checked on 5 November 2026, there are three rates:
- Standard rate, 20%: most goods and services.
- Reduced rate, 5%: some goods and services, for example children's car seats and home energy.
- Zero rate, 0%: zero-rated goods and services, for example most food and children's clothes.
Zero-rated is not the same as exempt. Some things, such as postage stamps and financial and property transactions, are exempt from VAT altogether. Food is a good example of why the detail matters in a shop: most food is zero-rated, but HMRC lists exceptions that are always standard-rated, including confectionery, crisps and roasted or salted nuts, ice cream, alcoholic drinks and soft drinks such as cola and squash. The full rules are in HMRC's guidance on food products and VAT.
Which rate applies to a product is set by HMRC, not by the shop. If you are unsure about a line, check VAT rates on different goods and services or ask your accountant.
Reverse VAT: why you divide instead of subtracting
VAT is worked out on the net price, so the VAT inside a gross price is a share of the gross, not 20% of it. A £240 gross price is £200 net plus £40 VAT. The £40 is 20% of £200, but only one sixth of £240. Taking 20% off £240 gives £192, which is £8 too low. Dividing by 1.2 always lands on the right net figure, which is why the calculator above does it that way.
Using VAT figures in your shop
Prices for shoppers include VAT; supplier costs usually do not. To set a price or check a margin, convert both to net first. A standard-rated item on the shelf at £3.00 is £2.50 net, and that £2.50 is what you compare with the cost. Our guide to calculating profit margin shows how VAT changes the answer, and the profit margin calculator works it out for you.
For registration, schemes and returns, start at GOV.UK: VAT registration. POS2026 records your sales, purchases and expenses with reports you can filter and export, but it does not prepare or file VAT returns.
Questions
Common questions.
Straight answers for shop owners, based on what POS2026 actually does.
How do I add 20% VAT to a price?
Multiply the price by 1.2. For example, £45 × 1.2 = £54, of which £9 is VAT.
How do I remove VAT from a price?
Divide the price including VAT by 1.2 at the standard rate, or by 1.05 at the reduced rate. For example, £54 ÷ 1.2 = £45 net.
How do I work out how much VAT is in a price?
At 20%, divide the gross price by 6. At 5%, divide it by 21. So a £54 price includes £9 of VAT at the standard rate.
What are the UK VAT rates in 2026?
The standard rate is 20%, the reduced rate is 5% and the zero rate is 0%, according to GOV.UK when checked on 5 November 2026. Rates can change, so check GOV.UK before relying on them.
Is there VAT in the USA?
The US does not have a national VAT. Instead, most states and many local areas charge sales tax, which is added at the register. Use the sales tax calculator for US prices.
Does POS2026 file VAT returns?
No. POS2026 keeps your sales, purchases and expenses in one place with reports you can export, but it does not prepare or submit VAT returns. Use your accountant or HMRC-recognised software for that.
Keep every sale, purchase and expense in one place.
POS2026 records the whole shop with reports you can filter and export, ready for whoever does your books.
