🇬🇧 2026/27 Rates · £90,000 threshold

UK VAT Calculator 2026/27

Instantly add or remove UK VAT at standard 20%, reduced 5%, or zero rate. Plus: when you need to register, Flat Rate scheme basics, and what's actually exempt.

£

Gross Amount (Inc VAT)

£120.00

Net Amount (Exc VAT)£100.00
VAT Amount (20%)+ £20.00
Gross Amount (Inc VAT)£120.00

VAT rates in the UK — what's charged on what

There are three VAT rates in the UK, plus exempt status which is different again. Here's a practical breakdown of what falls into each category:

20%

Standard Rate

Examples: Electronics, clothing (adult), professional services, alcohol, vehicles, most goods and services

Calculation: × 1.2 to add, ÷ 1.2 to remove

5%

Reduced Rate

Examples: Domestic energy (gas, electricity), children's car seats, mobility aids, sanitary products, insulation

Calculation: × 1.05 to add, ÷ 1.05 to remove

0%

Zero Rate

Examples: Most food (not hot/restaurant), children's clothing, books and newspapers, most prescription drugs, public transport

Calculation: No VAT — but businesses can reclaim input VAT

Exempt

VAT Exempt

Examples: Insurance, financial services, health and medical services, education, postage stamps, betting and gaming

No VAT charged and businesses cannot reclaim input VAT on related costs

When do you need to register for VAT?

VAT registration is mandatory once your taxable turnover (not profit — turnover) exceeds £90,000 in any rolling 12-month period. You must register within 30 days of crossing the threshold, and start charging VAT from the day you were required to register.

You can also register voluntarily below the threshold. This makes sense if your clients are primarily VAT-registered businesses (they can reclaim the VAT you charge), or if you have significant VAT costs you want to reclaim on your own purchases.

Must register

Taxable turnover exceeds £90,000 in any 12-month rolling period. Register within 30 days or face penalties.

Voluntary registration

Any business below £90,000 can register voluntarily. Good for B2B businesses with VAT-registered clients.

Deregistration threshold

You can deregister if turnover drops below £88,000. Once deregistered, stop charging VAT immediately.

VAT for freelancers and sole traders

Most freelancers and sole traders start their business below the £90,000 threshold and don't need to register. But there are some situations where VAT becomes relevant even at lower turnover levels.

The Flat Rate Scheme is particularly popular with contractors and consultants who are VAT registered. Instead of recording input and output VAT on every transaction, you charge clients 20% VAT but pay HMRC a lower flat percentage of your gross income. The difference is your to keep as profit.

Business typeFlat Rate % (pay to HMRC)Example: £10,000 invoice
IT consultant / contractor14.5%Charge £12,000, pay £1,740, keep £260
Management consultant14%Charge £12,000, pay £1,680, keep £320
Architect14.5%Charge £12,000, pay £1,740, keep £260
Accountant / bookkeeper14.5%Charge £12,000, pay £1,740, keep £260
Hairdresser / beauty13%Charge £12,000, pay £1,560, keep £440

First year discount: New VAT-registered businesses using the Flat Rate Scheme get a 1% reduction on their flat rate for the first year. An IT contractor would pay 13.5% instead of 14.5% — saving hundreds of pounds.

Frequently asked questions

How do I add 20% VAT to a price?
To add 20% VAT to a net amount, multiply by 1.2. Example: £500 net × 1.2 = £600 gross (including £100 VAT). For the 5% reduced rate, multiply by 1.05. This works for any amount — invoices, quotes, or receipts.
How do I remove 20% VAT from a price?
To remove 20% VAT from a gross (VAT-inclusive) price and find the net amount, divide by 1.2. Example: £600 gross ÷ 1.2 = £500 net. To find just the VAT portion, divide the gross price by 6. Example: £600 ÷ 6 = £100 VAT. For the 5% reduced rate, divide by 1.05, or divide by 21 to find the VAT portion.
What is the difference between VAT exempt and zero-rated?
Both zero-rated and VAT-exempt mean the customer pays no VAT — but the difference matters to the seller. Zero-rated goods (e.g. most food, children's clothes, books) are still technically VATable at 0%, so VAT-registered businesses can reclaim input VAT on costs. VAT-exempt goods (e.g. insurance, health services, education) are completely outside the VAT system, so businesses can't reclaim input VAT on costs related to exempt sales.
What is the VAT registration threshold in 2026/27?
The VAT registration threshold is £90,000 of taxable turnover in any rolling 12-month period in 2026/27. If your turnover exceeds this, you must register for VAT within 30 days. You can also register voluntarily below the threshold — which can be beneficial if you sell primarily to VAT-registered businesses, as you can reclaim VAT on your own purchases.
Do I need to charge VAT as a sole trader?
Only if you are VAT registered. If your annual turnover is below £90,000, you don't have to register and don't charge VAT. If you register (either because you've exceeded the threshold, or voluntarily), you must charge VAT on all standard-rated and reduced-rated supplies. Most small sole traders below £90,000 choose not to register to keep their prices competitive, especially when selling to the public.
What is the Flat Rate VAT scheme?
The Flat Rate Scheme (FRS) is available to businesses with taxable turnover under £150,000. Instead of calculating VAT on each transaction, you pay a fixed percentage of your gross (VAT-inclusive) turnover to HMRC. The rate varies by sector — for example, 12% for consultants, 9.5% for IT contractors, 7.5% for architects. You charge customers 20% VAT but pay a lower flat rate to HMRC, keeping the difference as profit. First-year businesses get a 1% discount.

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