Working out VAT manually is straightforward once you know which formula to use. There are two scenarios: adding VAT to a net price (exclusive), or extracting VAT from a price that already includes it (inclusive).
Use when your price does not yet include VAT.
Use when a price already includes 20% VAT and you need to separate it out.
Applies to items like children's car seats and some energy-saving materials.
A freelance web designer charges a client £1,000 for a project. The invoice is VAT-exclusive, so 20% VAT needs to be added on top.
A shop receipt shows £480 for goods including 20% VAT. You need to find the original net price and the VAT element for your records.
Choose whether your figures are VAT-exclusive (net - VAT is added on top) or VAT-inclusive (gross - VAT is already included in the price).
Input your total sales figures for the VAT period, split by rate. You only need to fill in the boxes that apply to your business - leave the rest as zero.
The calculator automatically adds up your sales entries and displays a total. Check this matches the total turnover on your records before moving on.
Now input your business expenses for the same period, again split by VAT rate. These are the costs on which you can reclaim input VAT from HMRC.
As with sales, the calculator totals your purchases automatically. Verify this against your expense records to ensure nothing has been missed before calculating.
Hit the Calculate button and the tool will instantly display the net VAT due to HMRC - your output tax (VAT on sales) minus your input tax (VAT on purchases).
HMRC sets five VAT classifications for goods and services sold in the UK. The rate that applies depends on what you're selling - not how you sell it.
| VAT Rate | Rate (%) | What It Applies To |
|---|---|---|
| Standard Rate | 20% | Most goods and services sold in the UK |
| Reduced Rate | 5% | Selected essential or socially beneficial goods and services |
| Zero-Rated | 0% | VAT is charged at 0%, but sales are still reported on VAT returns |
| Exempt | N/A | No VAT is charged, and VAT on related costs cannot be reclaimed |
| Outside Scope | N/A | Transactions not covered by the UK VAT system |
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Read moreYou must register for VAT if your VAT-taxable turnover exceeds the HMRC threshold. You can also register voluntarily if your turnover is lower.
MTD requires businesses to keep digital VAT records and submit VAT returns using compatible software. It applies to most VAT-registered businesses.
The Flat Rate Scheme allows eligible small businesses to pay a fixed VAT percentage based on their industry. It can simplify VAT reporting.
Yes, you may be able to reclaim VAT on certain business purchases made before registration, subject to HMRC rules and time limits.
It depends on where your customers are located and what you sell. Different VAT rules apply to international sales.

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