Add VAT, take VAT off a gross figure, or work out the trickier bits the standard calculators skip — the construction reverse charge, the Flat Rate Scheme, and whether you’ve crossed the £90,000 registration threshold. Every figure here comes from HMRC guidance, and there’s nothing to sell you.
Adding and removing VAT
VAT in the UK has three rates: the standard rate of 20%, a reduced rate of 5% (things like domestic energy and some home-energy work), and a zero rate of 0%. The maths is straightforward:
To add VAT: VAT = net × rate. So £100 + 20% VAT = £20 VAT, £120 gross. To remove VAT: net = gross ÷ (1 + rate). So £120 at 20% comes back to £100 + £20 VAT.
The common mistake is “removing” VAT by taking 20% off the gross figure — that gives the wrong answer, because the 20% was added to the net, not the gross. Take 20% off £120 and you get £96; the correct net is £100. This calculator does it the right way round, and shows you the net, the VAT and the gross on every result.
HMRC allows businesses to round VAT down to the nearest penny on some invoice lines. This tool uses nearest-penny rounding (half-up) for clarity, so an invoice might differ by a penny from what you submit.
The construction reverse charge — for CIS trades
This is the one that catches out plumbers, heating engineers and other building trades, so it’s worth getting right.
Since March 2021, when a VAT-registered business supplies CIS construction services to another VAT-registered business, the supplier doesn’t charge VAT. Instead, the customer accounts for it on their own VAT return. So as a subcontractor you invoice the work at the net figure, charge £0 VAT, and add a line telling the customer how much VAT they need to account for.
It applies only when all of these are true:
- both you and your customer are VAT-registered in the UK
- the work is reported under the Construction Industry Scheme (CIS)
- it’s standard-rated (20%) or reduced-rated (5%) work — never zero-rated
- your customer is not an end user
That last point is where most of the confusion sits. If you’re working directly for the householder or a business that isn’t making an onward construction supply, they’re an end user and you charge VAT normally. The reverse charge is for the middle of the supply chain, not the end of it.
On the ground, three traps come up again and again. First, end-user status: a main contractor may still be an end user for a job if they aren’t making an onward construction supply — get it wrong and you’ve invoiced £0 VAT when you should have charged 20%. Second, a straight boiler swap isn’t always “installation of a system of heating” for CIS, so it can sit outside the reverse charge. Third, materials with labour usually travel with the reverse-charged service, but a materials-only supply does not. When the calculator says reverse charge applies, use the £0 VAT line and the “customer to account for £X” wording it prints.
Should you use the Flat Rate Scheme?
The Flat Rate Scheme lets smaller businesses pay VAT as a fixed percentage of their VAT-inclusive turnover, instead of tallying up VAT on every sale and purchase. You still charge your customers 20%, but you hand a flat percentage to HMRC and keep the difference — the trade-off being you generally can’t reclaim VAT on your purchases.
You can join if your VAT-taxable turnover for the next 12 months will be £150,000 or less (excluding VAT), and you have to leave once your VAT-inclusive turnover tops £230,000. There’s a 1% discount in your first year of VAT registration.
The catch for trades is the limited cost trader rule. If your spending on goods is less than 2% of your turnover — or less than £1,000 a year — you’re forced onto a flat rate of 16.5%, which almost always wipes out the benefit. Labour-heavy businesses that buy few materials often fall into this, so the scheme that looks generous on paper can quietly cost you money. The calculator lets you enter your own sector percentage (check yours in VAT Notice 733) and compares the Flat Rate result against standard VAT accounting so you can see the actual difference.
Have you crossed the registration threshold?
You must register for VAT once your taxable turnover exceeds £90,000 over any rolling 12-month period — and this trips people up, because it’s not your accounting year or the tax year. At the end of every month you look back over the last 12 and check. You also have to register if you expect to go over £90,000 in the next 30 days alone.
Once you’re registered, you can only deregister if your turnover falls below £88,000. Miss the registration deadline and HMRC charges a penalty that grows the later you are — confirm the current bands on GOV.UK. Enter your rolling 12-month turnover in the calculator to see where you stand and how much headroom is left.
When this calculator can’t be the final word
VAT is full of edge cases, and a calculator is a starting point, not your accountant:
- What rate applies to a specific job isn’t always obvious — some home-energy and construction work is reduced- or zero-rated under conditions.
- Reverse charge eligibility depends on facts this tool can’t verify (end-user status, CIS reporting, whether the work qualifies).
- Flat Rate Scheme decisions depend on your full cost profile, not just one period.
- Tax rules change — often at a Budget. Check the review date at the top of this page.
For anything with real money riding on it, confirm with HMRC guidance or an accountant.
Frequently asked questions
How do I take VAT off a price? Divide the gross by 1.2 (for 20%) to get the net. Don’t take 20% off the gross — that under-counts the net.
What’s the VAT rate in the UK? 20% standard, 5% reduced, and 0% zero-rated, as of the 2026/27 year.
Do I charge VAT on construction work? Sometimes the customer accounts for it under the domestic reverse charge — if you’re both VAT-registered, the work is within CIS, and your customer isn’t the end user.
When do I have to register for VAT? When taxable turnover passes £90,000 over any rolling 12 months, or you expect to pass it in the next 30 days.
Is the Flat Rate Scheme worth it for a trade? Often not if you buy few materials — limited-cost-trader forces 16.5%. Compare with the estimator above.
Sources & how this is kept current
Rates, thresholds and rules come from HMRC / GOV.UK: VAT rates, when to register, the domestic reverse charge for building and construction services, and the Flat Rate Scheme (VAT Notice 733). Figures are current for the 2026/27 year — see the review date above. This is information to help you understand VAT, not tax advice.