Enter the net amount (excluding VAT)
Reg. 07380272 · England & Wales · Est. 2010
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Net Amount (excl. VAT)
£1,000.00
VAT Amount
£200.00
Rate Applied
Direction
Gross Amount (incl. VAT)
£1,200.00
Net vs VAT Breakdown
Value Added Tax (VAT) is a consumption tax charged on most goods and services sold in the UK. Businesses with taxable turnover above £90,000 must register for VAT with HMRC. Once registered, you charge VAT on your sales (output tax) and can reclaim VAT on your business purchases (input tax). You pay the difference to HMRC, usually quarterly.
The standard rate of 20% applies to most goods and services. A reduced rate of 5% applies to certain items like home energy, child car seats, and sanitary products. Some goods and services are zero-rated (0%), including most food, children's clothing, books, and newspapers. Exempt items (financial services, insurance, education) are outside the VAT system entirely.
The Flat Rate Scheme is a simplified VAT scheme for small businesses with turnover under £150,000. Instead of tracking input and output VAT separately, you pay a fixed percentage of your gross turnover to HMRC. The percentage depends on your type of business. In your first year of VAT registration, you receive a 1% discount on your flat rate.
When do I need to register for VAT?
You must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period, or if you expect it to exceed £90,000 in the next 30 days alone. You can also register voluntarily below the threshold, which lets you reclaim VAT on purchases.
What is the Flat Rate Scheme?
The Flat Rate Scheme (FRS) lets you pay a fixed percentage of your gross turnover to HMRC instead of calculating exact VAT on every transaction. It is designed for small businesses with turnover under £150,000. In your first year you get a 1% discount.
What is the difference between exempt and zero-rated?
Zero-rated goods are VAT-taxable at 0% -- you charge no VAT but can reclaim input VAT. Exempt supplies are outside the VAT system entirely. Examples of zero-rated items include most food and children's clothing.
Can I reclaim VAT on all business purchases?
You can reclaim VAT on goods and services purchased solely for business use, provided you have a valid VAT invoice. You cannot reclaim VAT on business entertainment, personal use, or purchases from non-VAT-registered suppliers.
HMRC-Aligned: This calculator uses official 2025/26 VAT rates, thresholds, and flat rate scheme percentages. For complex VAT situations, consult a qualified accountant.
VAT Rates
- • Standard rate: 20%
- • Reduced rate: 5%
- • Zero rate: 0%
- • Exempt: outside the VAT system
Key Thresholds
- • Registration threshold: £90,000
- • Deregistration threshold: £88,000
- • Flat Rate Scheme limit: £150,000 (excl. VAT)
- • Cash Accounting Scheme limit: £1,350,000
Common Zero-Rated & Reduced-Rate Items
Zero Rate (0%)
Most food & drink, children's clothing & shoes, books & newspapers, public transport, prescribed medicines
Reduced Rate (5%)
Domestic fuel & power, child car seats, contraceptives, smoking cessation products, mobility aids for elderly
This calculator uses official rates and thresholds from:
Last verified: February 2026 · Tax year 2025/26. Results are indicative — consult a qualified accountant for personalised advice.
Reviewed by M. Samiuddin Quadri, ACCA — Chartered Certified Accountant at Gladstone & Co. · Updated for the 2025/26 tax year.
Disclaimer: This calculator provides estimates based on current HMRC rates and thresholds for the 2025/26 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant or tax adviser before making financial decisions. Read our terms