How to Add or Remove VAT from a Price (UK Guide with Examples)
By Saurabh Pandey · Updated · 3 min read
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Adding VAT to a price is easy. Taking VAT out of a price is where people get it wrong – including plenty of experienced business owners. This guide shows the correct formulas for both, explains the mistake to avoid, and covers the UK VAT basics every online seller needs.
If you just need the answer, use the calculator: choose Add VAT or Remove VAT, enter your amount and pick the rate.
VAT Calculator (UK)
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UK VAT rates at a glance
| Rate | % | Examples |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced | 5% | Home energy, children’s car seats |
| Zero | 0% | Most food, books and newspapers, children’s clothes |
Some goods and services are exempt from VAT altogether, which is different from zero-rated. Check HMRC’s guidance for your specific products.
How to add VAT to a price
To add VAT, multiply the net price (the price before VAT) by 1 plus the VAT rate:
Gross price = Net price × (1 + VAT rate)
At the standard 20% rate, that means multiply by 1.2.
- £50 + VAT = £50 × 1.2 = £60 (VAT is £10)
- £84.99 + VAT = £84.99 × 1.2 = £101.99 (VAT is £17.00)
At the reduced 5% rate, multiply by 1.05.
How to remove VAT from a price
To remove VAT from a price that already includes it, divide by 1 plus the VAT rate:
Net price = Gross price ÷ (1 + VAT rate)
At 20%, that means divide by 1.2.
- £60 including VAT ÷ 1.2 = £50 net (VAT is £10)
- £24.99 including VAT ÷ 1.2 = £20.83 net (VAT is £4.16)
The VAT fraction shortcut
To find just the VAT inside a VAT-inclusive price at 20%, divide by 6 (this is called the VAT fraction, 1/6):
- £60 ÷ 6 = £10 VAT
- £30 ÷ 6 = £5 VAT
At 5%, the VAT fraction is 1/21.
The mistake almost everyone makes
The most common error is removing 20% VAT by multiplying by 0.8 (or taking away 20%).
- ✗ Wrong: £120 × 0.8 = £96
- ✓ Correct: £120 ÷ 1.2 = £100
Why the difference? VAT is 20% of the net price, not 20% of the gross price. On a £100 net price, VAT is £20 and the gross is £120. The £20 of VAT is 20% of £100 – but only 16.7% of £120. So taking 20% off £120 removes too much.
Getting this wrong means your accounts, invoices and profit calculations are all slightly off – and over a year of sales the difference adds up.
VAT and your selling prices
In the UK, prices to consumers must normally be shown including VAT. That has a big effect on your margins.
Say you sell a product for £30 including VAT and it costs you £12 (net) to make:
- Your net selling price is £30 ÷ 1.2 = £25
- The £5 of VAT belongs to HMRC, not to you
- Your profit is £25 − £12 = £13, not £18
If you become VAT-registered and keep your prices the same, your income per sale drops by a sixth overnight. Many small sellers raise prices when they register, or build VAT into their prices from the start. Use our profit margin calculator with net prices to see your real margin.
When do you need to register for VAT?
You must register for VAT if your VAT-taxable turnover goes over £90,000 in any rolling 12-month period, or if you expect it to go over £90,000 in the next 30 days alone. This is the threshold confirmed on GOV.UK in October 2026 – HMRC can change it, so check the current figure.
You can also register voluntarily below the threshold. This can make sense if most of your customers are VAT-registered businesses, or if you have lots of VAT to reclaim on costs.
VAT for online marketplace sellers
- Overseas sellers selling goods stored in the UK through online marketplaces (like Amazon, eBay and Etsy) usually have VAT collected by the marketplace.
- Imported goods worth £135 or less sold to UK consumers generally have VAT collected at the point of sale, often by the marketplace.
- VAT on marketplace fees. UK sellers are charged VAT on seller fees from platforms like Etsy. If you are VAT-registered you can usually reclaim it.
Rules for marketplaces are detailed, so check HMRC guidance or speak to an accountant for your situation.
Handy VAT reference table (20%)
| Net price | VAT (20%) | Gross price |
|---|---|---|
| £10.00 | £2.00 | £12.00 |
| £20.83 | £4.17 | £25.00 |
| £41.67 | £8.33 | £50.00 |
| £50.00 | £10.00 | £60.00 |
| £83.33 | £16.67 | £100.00 |
| £100.00 | £20.00 | £120.00 |
VAT schemes for small businesses
Once registered, some schemes can make VAT simpler:
- Flat Rate Scheme – you pay a fixed percentage of your VAT-inclusive turnover instead of working out VAT on each purchase. The percentage depends on your business type.
- Cash Accounting Scheme – you pay VAT when your customers pay you, rather than when you invoice.
- Annual Accounting Scheme – one VAT return a year with advance payments.
Each has eligibility rules, so check with HMRC or an accountant before joining.
The bottom line
To add 20% VAT, multiply by 1.2. To remove it, divide by 1.2 – never multiply by 0.8. Keep your profit calculations on net prices, watch the £90,000 registration threshold, and use the VAT calculator whenever you need a quick answer.
This guide is general information, not tax advice. VAT rules and thresholds change – check HMRC’s current guidance or speak to an accountant.
Frequently asked questions
How do I remove 20% VAT from a price?
Divide the price by 1.2. For example, £240 including VAT ÷ 1.2 = £200 net, and the VAT is £40.
How do I calculate VAT on a price?
Multiply the net price by 0.2 to get the VAT, or by 1.2 to get the total including VAT.
Is VAT charged on shipping?
Usually yes. Delivery charges generally follow the VAT treatment of the goods being delivered, so standard-rated goods mean standard-rated delivery.
What about VAT in other countries?
Most of Europe uses VAT too, at different rates. Australia, Canada and India use GST, which works in a similar way – see our GST guide for Australian and Canadian sellers. Our GST calculator covers Australia, New Zealand, Canada and India.