UK VAT Calculator

How UK VAT works, a quick guide

Value Added Tax is a consumption tax charged on most goods and services sold in the UK. Businesses act as collectors: you add VAT to your sales prices, charge it to customers, then pay the difference between VAT collected and VAT paid on your own purchases to HMRC.

The three rates

• 20% standard rate, applied to most goods and services.
• 5% reduced rate, applied to things like domestic fuel and power, child car seats and some energy-saving materials.
• 0% zero rate, applied to most food, children's clothes, books and newspapers. Zero rated is not the same as exempt: you can still reclaim input VAT on zero-rated supplies.

When do you have to register?

You must register for VAT once your taxable turnover crosses £90,000 in any rolling 12-month period (threshold effective from April 2024). You can also register voluntarily below the threshold, which can make sense if most of your customers are themselves VAT registered or if you incur significant input VAT.

The Flat Rate Scheme

Small businesses with turnover under £150,000 can opt into the Flat Rate Scheme. You pay a single flat percentage of your gross turnover instead of tracking input and output VAT separately. It simplifies record-keeping but you generally cannot reclaim VAT on most purchases.

Reverse charge and imports

For most services bought from suppliers outside the UK, and for construction services between VAT-registered contractors, the reverse charge applies. The buyer accounts for both the output and input VAT on their own return. For imports of goods, postponed VAT accounting lets VAT-registered importers declare and recover import VAT on the same return instead of paying it at the border.