Taking VAT off a price — working backwards from a VAT-inclusive (gross) price to the VAT-exclusive (net) price — is the calculation behind every input-VAT reclaim, supplier invoice check and "was I overcharged?" question. It trips people up because the maths is not the mirror image of adding VAT: you divide, you don't subtract the percentage. This guide gives the exact formulas for removing 20%, 5% and 0% VAT, the one-sixth shortcut, worked £ examples, HMRC rounding rules and the mistakes that cost businesses money, all for the 2026/27 tax year.
For 2026/27, the UK VAT rates are: standard rate 20%, reduced rate 5%, and zero rate 0%. The VAT registration threshold is £90,000 of taxable turnover in any rolling 12-month period.
The Formula for Taking VAT Off
To remove VAT, divide the gross (VAT-inclusive) price by one plus the VAT rate:
Net price (excluding VAT) = Gross price (including VAT) ÷ (1 + VAT rate ÷ 100)
In practice:
| VAT rate | Divisor | Formula |
|---|---|---|
| Standard rate 20% | ÷ 1.20 | Net = Gross ÷ 1.20 |
| Reduced rate 5% | ÷ 1.05 | Net = Gross ÷ 1.05 |
| Zero rate 0% | ÷ 1.00 | Net = Gross (no VAT to remove) |
Once you have the net price, the VAT element is simply:
VAT amount = Gross price − Net price
The One-Sixth Shortcut (20% VAT)
At the standard 20% rate there is a handy shortcut: the VAT inside a gross price is exactly one-sixth of that price.
VAT amount = Gross price ÷ 6
So on a £120 gross price, the VAT is £120 ÷ 6 = £20, and the net price is £120 − £20 = £100. This works because 20% on top of net is the same as one-sixth of the gross: £100 + £20 = £120, and £20 is a sixth of £120.
The equivalent shortcut at the 5% reduced rate is to divide the gross price by 21: VAT = Gross ÷ 21 (because 5 ÷ 105 = 1 ÷ 21). On a £105 gross price, VAT = £105 ÷ 21 = £5.
Worked Examples: Removing 20% VAT
Example 1 — a £120 invoice. A supplier invoices £120 including VAT. Net = £120 ÷ 1.20 = £100. VAT = £120 − £100 = £20 (check: £120 ÷ 6 = £20 ✓).
Example 2 — a £240 gross price. Net = £240 ÷ 1.20 = £200. VAT = £40 (check: £240 ÷ 6 = £40 ✓).
Example 3 — a £49.99 retail price. Net = £49.99 ÷ 1.20 = £41.6583…, rounded to £41.66. VAT = £49.99 − £41.66 = £8.33. (Check: £41.66 × 1.20 = £49.992, which rounds to £49.99 ✓.)
Example 4 — a £1,199 laptop. Net = £1,199 ÷ 1.20 = £999.1666…, rounded to £999.17. VAT = £1,199 − £999.17 = £199.83.
Example 5 — a £9.99 small item. Net = £9.99 ÷ 1.20 = £8.325, rounded to £8.33. VAT = £9.99 − £8.33 = £1.66.
Worked Examples: Removing 5% and 0% VAT
Example — £105 gross at 5%. Net = £105 ÷ 1.05 = £100. VAT = £105 − £100 = £5 (check: £105 ÷ 21 = £5 ✓).
Example — £210 gross at 5%. Net = £210 ÷ 1.05 = £200. VAT = £10.
At the 0% zero rate there is no VAT to remove: a £40 gross price on zero-rated children's clothes is already the net price, £40.
The Mistake Almost Everyone Makes
The single most common error is subtracting the percentage instead of dividing:
- ❌ Wrong: £120 − 20% = £120 − £24 = £96
- ✅ Right: £120 ÷ 1.20 = £100
Subtracting 20% treats the VAT as a fifth of the gross price. But VAT was added as a fifth of the net price — £20 on £100 — which is a sixth of the gross £120. Mixing the two up understates the net price by £4 on every £120, and the error scales: on a £12,000 invoice it is a £400 mistake. Whenever you catch yourself reaching for the minus key, reach for divide instead.
HMRC Rounding Rules
When the division does not land on a whole penny, HMRC's VAT Notice 700 allows you to round the total VAT on an invoice down to the nearest whole penny — fractions of a penny can be ignored. Per-line VAT may be worked to 0.1p or rounded to the nearest 0.5p or 1p, applied consistently.
In the examples above, £49.99 ÷ 1.20 = £41.6583… becomes a net price of £41.66 and VAT of £8.33, which reconciles exactly to the £49.99 gross. Always reconcile: net + VAT must equal the gross price you started from.
When Do You Need to Take VAT Off?
Reclaiming input VAT. A VAT-registered business reclaims the VAT on its purchases by extracting it from suppliers' gross invoices. On a £600 standard-rated invoice, the reclaimable input VAT is £600 ÷ 6 = £100. You need a valid VAT invoice showing the VAT separately to reclaim it — see our guide on what to include on a VAT invoice.
Checking you were charged correctly. Dividing a supplier's gross price by 1.20 and comparing the result with their stated net price catches billing errors in seconds.
Reverse charge accounting. Under the domestic reverse charge (for example, in construction services), the customer accounts for the VAT instead of the supplier. Working out the VAT element of the gross contract value uses the same divide-by-1.20 calculation. Our reverse charge explained guide covers when it applies.
Second-hand margin scheme. Dealers in second-hand goods, art and antiques account for VAT only on their profit margin, not the full selling price — a different kind of "taking VAT off", where the VAT is one-sixth of the margin, not the price. See VAT on second-hand goods: the margin scheme.
Flat Rate Scheme checks. Businesses on the Flat Rate Scheme pay HMRC a flat percentage of gross turnover, so extracting the real VAT from gross takings is how they sense-check their figures.
Full Worked Example: Checking a Supplier Invoice
A supplier sends you this invoice, all standard-rated:
- Web design services: £850.00 net
- Stock photography licence: £120.00 net
- Courier delivery: £12.50 net
- Invoice total including VAT: £1,179.00
To check it, work backwards from the gross total. Net total = £850 + £120 + £12.50 = £982.50. Gross ÷ 1.20 = £1,179 ÷ 1.20 = £982.50 ✓ — the net matches. VAT = £1,179 − £982.50 = £196.50 (check: £1,179 ÷ 6 = £196.50 ✓). Everything reconciles, so the invoice is correct and you can reclaim £196.50 of input VAT on your return. If the numbers had not reconciled, you would query the invoice before paying — never reclaim VAT from an invoice whose figures do not add up.
Quick Reference: Removing VAT at a Glance
- 20% VAT: divide the gross price by 1.2 (or take a sixth: gross ÷ 6 = VAT)
- 5% VAT: divide the gross price by 1.05 (or: gross ÷ 21 = VAT)
- 0% VAT: nothing to remove
- VAT amount: gross − net after the division
- Never subtract the percentage — always divide
- Reconcile: net + VAT must equal the gross price
- Round invoice VAT down to the nearest penny
FAQs
What is the formula for taking 20% VAT off a price?
Divide the VAT-inclusive price by 1.20. For example, £300 ÷ 1.20 = £250 net, so the VAT is £50. The shortcut: VAT = gross ÷ 6, so £300 ÷ 6 = £50.
Is taking 20% off the same as dividing by 1.2?
No — and this is the classic trap. Taking 20% off £120 gives £96, but the correct net price is £100 (£120 ÷ 1.20). Subtracting the percentage always understates the net price because VAT was added to the net, not the gross.
Why is the VAT £20 on a £120 price and not £24?
Because VAT is charged on the net price: 20% of £100 is £20, making £120 gross. £24 would be 20% of the gross price, which is not how VAT works. The VAT inside any 20%-rated gross price is one-sixth of it.
Can I reclaim VAT just by calculating it from the gross price?
You can calculate it, but to actually reclaim input VAT you normally need a valid VAT invoice from the supplier showing their VAT number, the rate, and the VAT amount separately. Calculation alone does not create a reclaim right.
How do I take VAT off a price at the 5% rate?
Divide the gross price by 1.05. For example, £157.50 ÷ 1.05 = £150 net, so the VAT is £7.50. Shortcut: VAT = gross ÷ 21.
Does removing VAT work on zero-rated or exempt items?
There is nothing to remove: at 0% the gross price is already the net price. Note that zero-rated and exempt are different — zero-rated turnover counts towards the £90,000 registration threshold while exempt turnover does not. See zero-rated vs exempt VAT.
Internal links: /how-to-add-vat-to-a-price-uk/, /vat-on-invoices-uk-what-to-include/, /vat-reverse-charge-explained-uk/, /vat-on-second-hand-goods-margin-scheme/, /how-to-calculate-flat-rate-vat/, /zero-rated-vs-exempt-vat-uk/ Author: VAT Calculator Team
Educational information and estimates. These tools do not submit VAT returns or determine the treatment of a specific transaction.