Free VAT Calculator Online
As a VAT registered business in the UK, you need to charge VAT on most supply goods and services. You also need to pay VAT on goods and services you buy from other businesses if registered for VAT.
The amount of VAT you charge depends on the type of goods or services you supply. For example, standard-rated items have a VAT rate of 20%.
You can use our free VAT calculator to work out how much VAT to charge on your goods and services or how much VAT you will pay when you buy goods and services.
To use the VAT calculator, you will need to know the following:
- The VAT rate
- The VAT inclusive or VAT Exclusive price
What is Value Added Tax
VAT, or value-added tax, is a tax that is added to the sale of goods and services. VAT is typically calculated as a percentage of the final purchase price. For example, if a customer buys a product for 100 and the VAT rate is 20%, the customer would owe 120 total, with 20 being VAT.
VAT is typically collected by businesses and then paid to the government. In some countries, VAT is also imposed on imports. VAT rates can vary significantly from country to country, and they are often subject to change. For businesses, it is vital to stay up-to-date on VAT rates to calculate and pay the tax correctly.
UK VAT Rate
The current UK government has set 3 VAT percentage rates which are:
Standard VAT rate of 20% was introduced in 2011. The standard rate includes most goods or services if VAT is registered.
Reduced VAT rate of 5%. The reduced rate is used for child car seats and home energy fuel and power. There is also a reduced rate for mobility aids if the person is over 60 and they are installed in the home.
Zero-rated VAT means that the goods are subject to VAT but are charged at 0%. Zero-rated goods include children’s clothes, books, food and newspapers. There are some exceptions, and the rules are complicated, check on the gov.uk website if you are unsure of the rate.
VAT is charged on most goods and services sold in the UK, with some exceptions, such as food, children’s clothes, and books. VAT is also charged on imported goods and services and on exports to countries outside the EU. Businesses must register for VAT if their taxable turnover exceeds £90,000 per year from 2024.
Once registered, businesses must charge VAT on their sales and pay any VAT due to HM Revenue & Customs (HMRC). If a company makes exempt or zero-rated supplies, they can still register for VAT to reclaim any VAT paid on their purchases.
How to Calculate VAT
Although we provide a VAT calculator, it is helpful to know the formula and how to calculate VAT.
VAT Inclusive (removing VAT)
For calculating the amount inclusive of VAT, you divide the total figure by 1 plus and the VAT percentage. 20% as a decimal is .2. for a reduced rate, it is .05.
In our example, we are using the standard rate of VAT at 20% and a gross price of 120.00
The calculation is as follows:
120 / 1.2 = 100
The VAT element is therefore:
120 – 100 = 20
Another way to calculate the VAT amount is by taking the total figure and dividing it by 100 plus the VAT rate, and then multiplying it by the VAT rate. Our example is as follows:
120 / 120 * 20 = 20
VAT Exclusive (Adding VAT)
For calculating the amount exclusive of VAT, you multiply the figure by 1 plus the VAT percentage.
Therefore if the price excluding VAT is 100 and you want to find the VAT at 20%, the calculations are as follows:
100 x 1.2 = 120
To calculate, you subtract the net amount from the gross amount. The VAT element is:
120 – 100 = 20
It is also possible to divide the net amount by 100 and multiply by the VAT rate.
100/100 x 20 = 20
Valued Added Tax on invoices
If the business is VAT registered, the sales invoice must show the VAT number, net amount, the VAT amount and the gross amount due. Please read our article on sales invoices to find everything you need on a VAT sales invoice.
If a customer is not registered for VAT, they will not be able to reclaim any VAT paid on their purchases.
The easiest way to produce a sales invoice showing sales tax is by using accounting software. There are many packages to choose from; most offer a free trial, including FreshBooks, Xero, QuickBooks or Sage. The advantage of using software is it will calculate the VAT for you, the rates are set up, and VAT returns are submitted to HMRC easily.
Making Tax Digital
The Making Tax Digital initiative was introduced in the UK in 2019. The initiative aims to make the VAT system more efficient and easier to use. Under the Making Tax Digital scheme, businesses must maintain digital records of their VAT returns and submit them using software approved by HMRC.
The making tax digital scheme has been slowly rolled out, with businesses with a turnover above the VAT threshold required to comply from April 2019. Critics have raised concerns about the cost of compliance and the burden on businesses, particularly small businesses. However, the making tax digital scheme is intended to save businesses time and money in the long run.
Free VAT Calculators
Below are 2 free VAT calculators.
Excluding VAT Calculator
If you know the net price and the VAT rate, you can put in the information to find out how much the VAT will be. The net amount is what you get after subtracting the VAT from the price.
Including VAT Calculator
If you have the gross amount and calculating VAT, enter the VAT percentage and gross amount (amount including VAT. The calculator will subtract VAT from the gross amount and prove the net figure and VAT amount.
Other Useful Calculators
The Flat Rate VAT Calculator is for businesses looking to see if using the value-added tax flat rate scheme is better for the business than using the standard rate. It can reduce the VAT that a business needs to pay.
VAT Calculator Conclusion
The free UK VAT calculator can help you work out how much VAT to charge on your goods and services or how much VAT you will pay when you buy goods and services.
Businesses need to stay up-to-date on the UK VAT rates to calculate and pay the tax correctly. The calculation methods provided can be used to help you calculate VAT.
