To work out VAT at the standard rate of 20%, multiply the price before VAT by 1.2; to find the VAT already inside a price, divide that price by 6.
Those two rules cover almost every everyday case, from a quote from a builder to a business receipt. The second one surprises people: the VAT in a price of £120 is £20, not £24, because 20% applies to the price before VAT. This guide gives the current rates, the methods to add and remove VAT, the official VAT fraction explained by HMRC, quick ways to do it in your head and how to check a receipt.
The VAT rates in the UK
According to GOV.UK, the standard rate of VAT is 20%. It applies to most goods and services, and it rose to 20% on 4 January 2011, from 17.5%. Two other rates exist:
- Reduced rate, 5%, on some goods and services, for example children's car seats and home energy.
- Zero rate, 0%, on zero-rated goods and services, for example most food and children's clothes.
Some things are exempt from VAT altogether, such as postage stamps and financial and property transactions. Exempt and zero-rated differ for a business; for a shopper the result is the same: no VAT on that item.
The rest of this guide uses the standard rate, because that is where the arithmetic matters most.
Add VAT to a price
To add VAT at 20%, multiply the price without VAT by 1.2. The 1 keeps the original price and the 0.2 adds the 20%.
- £45 without VAT: 45 × 1.2 = £54.
- £149.99 without VAT: 149.99 × 1.2 = £179.988, so £179.99.
- £1,250 without VAT: 1,250 × 1.2 = £1,500.
| Price before VAT | VAT at 20% | Price with VAT |
|---|---|---|
| £10 | £2 | £12 |
| £45 | £9 | £54 |
| £149.99 | £30.00 | £179.99 |
| £1,250 | £250 | £1,500 |
| £3,600 | £720 | £4,320 |
In your head, it is often easier to find 10% and double it: 10% of £45 is £4.50, doubled is £9, so the price with VAT is £54. For the reduced rate, multiply by 1.05 instead: £300 of home energy becomes £315.
The same multiplier logic works for any percentage increase, as our guide to percentages in your head explains.
Remove VAT from a price
To remove VAT from a price that includes it, divide by 1.2. £54 including VAT becomes 54 ÷ 1.2 = £45, and the VAT is the difference, £9.
The common mistake is to take 20% off the price including VAT. On £54 that gives 54 − 10.80 = £43.20, which is £1.80 too low. The error comes from applying 20% to the wrong amount: VAT is 20% of the price before VAT, so it is a smaller share of the price after VAT.
A quick way to see the trap: adding 20% and then taking 20% off does not bring you back to the start. £100 plus 20% is £120, and £120 minus 20% is £96. Going back needs a division by 1.2, the exact reverse of the multiplication.
The bigger the price, the bigger the error. On a £1,500 invoice including VAT, the correct price before VAT is £1,250; subtracting 20% would give £1,200, £50 short.
Reverse VAT calculation with the VAT fraction
HMRC's VAT guide (VAT Notice 700) calls the share of VAT inside a price the VAT fraction. Its own example: if something sells for £2.40 with VAT at 20%, the VAT is 40 pence, one sixth of £2.40 and not 20% of it. The rule is the rate divided by 100 plus the rate: 20 ÷ 120, which is 1/6.
| VAT rate | To add VAT, multiply by | VAT fraction of a price including VAT | Example |
|---|---|---|---|
| 20% (standard) | 1.2 | 1/6 | £60 including VAT contains £10 of VAT |
| 5% (reduced) | 1.05 | 1/21 | £21 including VAT contains £1 of VAT |
| 0% (zero) | 1 | None | No VAT to remove |
The guide gives the fraction for other rates too, such as 1/11 at 10% and 1/5 at 25%, and notes that HMRC publicises revised fractions whenever rates change, while anyone can work them out with the same method. The logic is always the same: if VAT is r%, a price including VAT is made of 100 parts of price and r parts of VAT, so the VAT is r parts out of 100 + r.
Dividing by 6 and dividing by 1.2 are two routes to the same split: the first gives the VAT, the second gives the price before VAT, and the two always add back up to the price you started with.
VAT at 20% in your head
A few habits make the standard rate easy without a calculator:
- Adding VAT: 20% is one fifth, so divide by 5 and add. £35 plus one fifth (£7) is £42.
- Finding the VAT inside a price: divide by 6. £84 including VAT contains 84 ÷ 6 = £14 of VAT, so £70 before VAT.
- Awkward totals: round first. £250 including VAT contains about 250 ÷ 6 = £41.67 of VAT, so the price before VAT is about £208.33.
Two more examples to practise. £96 including VAT contains 96 ÷ 6 = £16 of VAT, so £80 before VAT. At the reduced rate, £27 including VAT at 5% contains 27 ÷ 21, about £1.29, so about £25.71 before VAT; check: 25.71 × 1.05 = £26.9955, which rounds to £27.00. Dividing by 21 is harder in your head, so for the reduced rate a rough answer, a little under 5% of the total, is often enough.
Checking the result takes one multiplication: £208.33 × 1.2 = £249.996, which rounds back to £250. Mental checks like this rely on quick times tables and divisions; Kalc trains times tables, fractions, percentages and algebra in about ten minutes a day.
Working out the VAT on a receipt or a quote
HMRC's guide explains that tax is normally calculated on a price decided without VAT, and that a full VAT invoice shows the separate amounts. Some less detailed invoices only show a total including VAT, which is exactly when the VAT fraction is needed.
When you check a receipt, look for three numbers: the net amount, the VAT and the total. The VAT should be about one fifth of the net amount and one sixth of the total. If a builder quotes £3,600 and you are not sure whether VAT is included, ask: with VAT on top, the bill would be £4,320.
Discounts and VAT combine in the same way. A £100 item with 10% off and VAT on top costs 100 × 0.9 × 1.2 = £108, and the order does not matter: applying VAT first and the discount second gives the same £108, because multiplications can be done in any order. What does change the result is adding and subtracting percentages instead of multiplying: 20% added and 10% taken off is not the same as 10% added.
The same multiplier thinking appears in many money calculations, from compound interest to the percentage questions of the GCSE non-calculator paper.
Frequently asked questions
How do you add 20% VAT to a price?
Multiply the price before VAT by 1.2. £45 becomes £54. In your head, find 10%, double it and add it.
How do you take VAT off a price that includes it?
Divide the price by 1.2 to get the price before VAT. £54 including VAT is £45 before VAT, so the VAT is £9.
Why is the VAT not 20% of the total price?
Because VAT is 20% of the price before VAT. Inside a price that already includes it, VAT at 20% is one sixth of the total, as HMRC's VAT fraction shows.
What is the VAT fraction for the 5% rate?
One twenty-first. A price of £21 including VAT at 5% contains £1 of VAT.
Which goods have 0% VAT in the UK?
Zero-rated goods and services, for example most food and children's clothes, according to GOV.UK. Some items, such as postage stamps, are exempt.
Practise mental maths in Kalc
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