What are the UK VAT rates?
The UK has three main VAT rates: the standard rate of 20% which applies to most goods and services, the reduced rate of 5% which applies to items such as domestic energy and children's car seats, and the zero rate (0%) which applies to most food, children's clothing, and books. Some items are VAT-exempt entirely, such as insurance, postage stamps, and financial services.
What is the VAT Flat Rate Scheme?
The VAT Flat Rate Scheme simplifies VAT accounting for small businesses with turnover under £150,000. Instead of calculating VAT on every transaction, you pay HMRC a fixed percentage of your gross (VAT-inclusive) turnover. The percentage varies by business sector. You still charge customers the standard 20% VAT but pay a lower percentage to HMRC, keeping the difference as profit.
How do I add VAT to a price?
To add VAT at 20%, multiply the net price by 1.20. For example, a £100 net price becomes £120 including VAT. To add VAT at 5%, multiply by 1.05.
How do I remove VAT from a price?
To remove 20% VAT from a gross price, divide by 1.20 or multiply by 0.8333. For example, a £120 gross price has a net value of £100 and VAT of £20. This is called extracting or backing out the VAT.