Start with the three amounts
A price before VAT is its net value. VAT is the tax component. The final price including VAT is its gross value. These names describe parts of the same transaction, not three separate payments. An illustrative £100 net sale plus £20 VAT creates a £120 customer bill.
Follow the money
Think of VAT collected on sales separately from trading income. VAT on purchases also needs its own records. The amount payable under ordinary VAT accounting often reflects sales VAT less allowable purchase VAT, with any required adjustments. Special schemes can change the calculation or its timing.
A simple bookkeeping example
Imagine £400 of output VAT and £150 of recoverable input VAT in a period, with no other adjustments. The arithmetic difference is £250. A price calculator cannot confirm that the entire £150 is recoverable, nor can it prepare all the return boxes. Keep supporting documents alongside the calculation.
Your first practical steps
Identify what you sell, check its VAT treatment, track taxable turnover and understand any registration obligation. Then agree how your records and invoices will be maintained. The guides below separate these decisions so you can work through them in order rather than assuming every sale has the same treatment.
One price. Three parts.
Move the rate slider to see how VAT changes a £100 net price.
£100 + £20 VAT = £120 total
This slider explains the arithmetic. It does not determine the legal rate for your sale.
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FAQs
What is VAT?
VAT (Value Added Tax) is a tax charged on most goods and services sold in the UK. Businesses collect it on behalf of HMRC: they add VAT to their prices, and the VAT they collect — less the VAT they pay on their own purchases — is paid over to HMRC.
Who has to charge VAT?
Only VAT-registered businesses charge VAT. You must register if your taxable turnover in any rolling 12 months exceeds £90,000, or you expect it to exceed £90,000 in the next 30 days alone. Below the threshold you can register voluntarily.
What are the UK VAT rates?
The standard rate is 20% and applies to most goods and services. A reduced rate of 5% applies to items such as domestic energy, and a 0% rate applies to most food, children's clothes, books and newspapers. Some goods and services are exempt or outside the scope of VAT entirely.
What is the difference between VAT and a sales tax?
VAT is charged at every stage of the supply chain, but each registered business only accounts for the tax on the value it adds — it reclaims the VAT on its purchases. A sales tax is charged once, at the final sale to the consumer.
Do I pay VAT as a customer?
Yes. If you buy from a VAT-registered business, the price you pay usually includes VAT. The receipt or invoice shows the VAT element separately, and it is the business — not you — that pays it to HMRC.
Official sources
Sources checked: 2026-09-26. Check the official guidance for later changes.
Educational information and estimates. These tools do not submit VAT returns or determine the treatment of a specific transaction.