The formula: VAT = price before VAT × rate, and total = price before VAT + VAT. To take VAT out of a price that includes it, multiply by the VAT fraction, rate ÷ (100 + rate): one sixth at 20% and one twenty-first at 5% (VAT Notice 700, 7.3.1).
VAT calculator
| Price before VAT | |
| VAT | |
| Total including VAT |
The two calculations
Adding VAT: £1,250.00 before VAT × 20% = £250.00 VAT, so the total is £1,500.00.
Taking VAT out: £1,500.00 including VAT × 1/6 = £250.00 VAT, so the price before VAT is £1,250.00. Taking 20% off the total (£300) is the most common mistake: 20% of a VAT-inclusive price is more than the VAT in it.
| VAT rate | VAT fraction (VAT in a VAT-inclusive price) | Divide the total by |
|---|---|---|
| 20% | 1/6 | 1.20 |
| 5% | 1/21 | 1.05 |
| 21% (Netherlands) | 21/121 | 1.21 |
UK fractions from VAT Notice 700, 7.3.1; the 21% row uses HMRC’s method, rate ÷ (100 + rate).
Line by line or on the total: rounding
HMRC lets invoice traders round the total VAT on an invoice down to a whole penny. If you work VAT out line by line, round each line either down to the nearest 0.1p or to the nearest 1p or 0.5p, and use the same method every time (VAT Notice 700, 17.5). The methods can differ by a penny or two. Three lines of £33.33 at 20%:
| Method | Working | VAT |
|---|---|---|
| Each line to the nearest penny | £6.666 rounds to £6.67, three times | £20.01 |
| On the total, rounded down | £99.99 × 20% = £19.998, rounded down | £19.99 |
Both are allowed. Pick one and keep to it so your invoices and your VAT return agree.
Different rates on one invoice
Show the VAT rate against each line and the VAT for each rate. Zero-rated or exempt lines must show clearly that no VAT is due and have their own total (VAT Notice 700, 16.5). Example for a home: loft insulation installed, £900 at 0% (energy-saving materials are zero-rated until 31 March 2027 under VAT Notice 708/6), plus repairs to the loft hatch, £150 at 20% = £30 VAT. Total £1,080.
Discounts
- A discount everyone gets: VAT is worked out on the discounted price.
- A discount for paying early: VAT is due on the amount actually paid. If you don’t issue a credit note when it is taken, the invoice must show the discount terms and say the customer can only recover the VAT actually paid (VAT Notice 700, 7.3.2 and 18.2.2).
Other countries use the same arithmetic with their own rates: Dutch BTW, Canadian GST and HST, Australian GST, UAE VAT at 5%. The UK VAT invoice generator does the sums for you, and what a VAT invoice must show lists the other details.
Sources checked 9 October 2026: HMRC VAT Notice 700 (last updated 25 June 2026), VAT Notice 708/6.