VAT Calculator
Add VAT to a net price or extract VAT from a gross price. Supports UK, EU, and global VAT rates with a custom rate option.
VAT Rate:
What is VAT and How Does It Work?
Value Added Tax (VAT) is a consumption tax applied to goods and services at each stage of production and distribution. Unlike US sales tax which is only collected at the point of sale, VAT is charged at every step of the supply chain — but businesses can reclaim the VAT they pay on their inputs, so the ultimate burden falls on the end consumer.
When you add VAT, you multiply the net price by (1 + VAT rate). When you extract VAT from a gross price, you divide by (1 + VAT rate) to find the net, then subtract to find the VAT component. For example, a £100 net price with 20% UK VAT becomes £120 gross. Extracting VAT from £120: £120 ÷ 1.20 = £100 net, and £20 VAT.
UK VAT Rates Explained
The UK applies three VAT rates: the standard rate of 20% applies to most goods and services; the reduced rate of 5% applies to things like home energy, children's car seats, and some health products; and a zero rate (0%) applies to essentials like most food, children's clothing, books, and prescription medications.
Businesses with taxable turnover above £90,000 (the 2024/25 threshold) must register for VAT, charge it on sales, and file quarterly VAT returns with HMRC. VAT-registered businesses can reclaim VAT paid on business expenses, which is one reason many businesses voluntarily register even below the threshold.