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UK VAT Calculator 2026/27 | UK Creative Ventures
Free Tool · 2026/27

UK VAT Calculator 2026/27

Add or remove VAT instantly at 20%, 5% or 0%. Track your £90,000 registration threshold month by month. Compare the flat rate scheme against standard VAT accounting, all free, no sign-up.

Updated for 2026/27 tax year Client-side , no data sent anywhere Free forever
Last updated: April 2026 · Reflects current HMRC VAT rates and £90,000 threshold
UK Creative Ventures · Free VAT Calculator
£
Net (ex-VAT)
£1,000.00
VAT amount
£200.00
Gross (inc-VAT)
£1,200.00
Net amount (ex-VAT) £1,000.00
VAT at 20% £200.00
Total gross (inc-VAT) £1,200.00

Enter your monthly turnover for the last 12 months. The rolling 12-month total is compared against the current £90,000 HMRC VAT registration threshold.

Rolling 12-month total £0
£0Threshold: £90,000

Month-by-month rolling total

MonthRevenueRolling 12mStatus

The VAT flat rate scheme lets eligible businesses pay a fixed percentage of gross turnover to HMRC instead of tracking input and output VAT on every transaction.

£
£
Standard VAT scheme
£0
Net VAT payable to HMRC per year
Flat rate scheme
£0
Net VAT payable to HMRC per year
⚠️ You can only join the flat rate scheme if your VAT-taxable turnover is £150,000 or less (ex-VAT). The limited cost trader rate of 16.5% applies if your VAT-able purchases are less than 2% of gross turnover or less than £1,000 per year — whichever is higher.

What is VAT and how does it work in the UK?

Value Added Tax (VAT) is a consumption tax collected by VAT-registered businesses on behalf of HMRC. As a VAT-registered business, you charge VAT on your taxable sales (output tax), reclaim VAT on eligible business purchases (input tax), and pay the difference to HMRC, usually every quarter.

VAT applies at different rates depending on the type of good or service. The vast majority of UK business transactions fall under the standard 20% rate, but reduced and zero rates apply to specific categories.

UK VAT rates for 2026/27

RatePercentageApplies to
Standard rate20%Most goods and services, the default rate for business-to-business and retail sales
Reduced rate5%Domestic energy (gas, electricity), children's car seats, certain renovation work, nicotine patches
Zero rate0%Most food, children's clothing, books and newspapers, public transport, new residential builds
ExemptN/AFinancial services, insurance, education, healthcare, no VAT charged and no input VAT reclaimed

Important: Zero-rated and exempt are not the same. Zero-rated supplies still count towards your VAT registration threshold and you can reclaim VAT on related purchases. Exempt supplies do not count towards the threshold and you cannot reclaim associated input VAT.

How to add VAT to a price

To add VAT at 20% to a net price, multiply the net amount by 1.20. For the reduced 5% rate, multiply by 1.05. The calculator above does this instantly, but understanding the formula is useful for invoicing and pricing decisions.

Worked example: adding standard rate VAT A Bristol marketing agency charges a client £2,500 net for a campaign.
VAT at 20%: £2,500 × 0.20 = £500
Invoice total (gross): £2,500 + £500 = £3,000

How to remove VAT from a gross price

To extract the VAT from a gross (VAT-inclusive) price, divide by 1.20 for the standard rate. The net figure is the gross divided by 1.20; the VAT amount is the gross minus the net. Never simply multiply the gross by 20%, that gives the wrong answer.

Worked example: removing standard rate VAT A gross invoice total is £3,600 and you need to know the VAT element.
Net amount: £3,600 ÷ 1.20 = £3,000
VAT element: £3,600 − £3,000 = £600
Multiplying £3,600 × 20% would give £720 — which is wrong.

The VAT registration threshold - £90,000 for 2026/27

You must register for VAT with HMRC if your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period. This is not a calendar-year limit, HMRC looks at any consecutive 12-month window. You should monitor your turnover every month and register within 30 days of the month in which you first exceeded the threshold.

You can also register voluntarily if your turnover is below the threshold. This is often worth doing if you have significant VAT-able costs to reclaim, or if your customers are VAT-registered businesses who can reclaim your VAT anyway.

When does the clock start?

The threshold is based on your taxable supplies, the total of standard-rated, reduced-rated and zero-rated sales. Exempt supplies do not count. If you breach the threshold at the end of any month, you must notify HMRC by the end of the following month and begin charging VAT from the first day of the month after that.

Worked example: threshold breach A freelance designer's rolling 12-month turnover crosses £90,000 on 31 March 2026.
Notification deadline: 30 April 2026
VAT charging starts: 1 May 2026
Failure to register on time can result in penalties of up to 15% of the VAT owed.

The VAT flat rate scheme explained

The flat rate scheme (FRS) is designed to simplify VAT accounting for smaller businesses. Instead of calculating VAT on every sale and purchase, you pay a single flat-rate percentage of your gross (VAT-inclusive) turnover directly to HMRC. You still charge customers 20% VAT on your invoices, but you pay HMRC a lower percentage, keeping the difference as a benefit.

The flat rate percentage varies by business sector, ranging from 4% (retailing of food) up to 16.5% for limited cost traders.

Who qualifies for the flat rate scheme?

  • Your VAT-taxable turnover must be £150,000 or less per year (ex-VAT) when you join
  • You must leave the scheme if your gross turnover exceeds £230,000
  • You cannot use FRS if you have left it in the past 12 months, or if you are closely associated with another FRS business

The limited cost trader rule

If your VAT-able purchases (goods only, not services, capital items or food for staff) are less than 2% of your gross turnover, or less than £1,000 per year, you are a limited cost trader and must use the 16.5% rate regardless of your sector. This rule was introduced to prevent service-based businesses (particularly contractors and consultants) from benefiting unfairly from the scheme.

Worked example: flat rate vs standard VAT A marketing consultant has gross turnover of £72,000 (inc. VAT) and spends £8,000 net on purchases.

Standard VAT scheme:
VAT collected: £72,000 − (£72,000 ÷ 1.20) = £12,000
VAT on purchases: £8,000 × 20% = £1,600
Net payable to HMRC: £12,000 − £1,600 = £10,400

Flat rate scheme (Marketing/PR at 11%):
Payable: £72,000 × 11% = £7,920

Flat rate saving: £2,480 per year

How to use the VAT threshold tracker

The threshold tracker tab lets you enter your revenue for each of the last 12 months. It calculates your rolling total and flags when you are approaching or have exceeded the £90,000 limit. Use it monthly as part of your bookkeeping routine, ideally alongside your bank reconciliation.

If your tracker shows amber (above £72,000 but below £90,000), start preparing for registration now: update your invoicing software, notify your accountant, and begin setting aside VAT on your sales so you're not caught short if you breach the threshold the following month.

VAT penalties and interest in 2026

HMRC introduced a new penalty regime in January 2023 that replaced the default surcharge system. Under the new rules:

  • Late submission: A points-based system, each late return adds a point, and you receive a £200 penalty once you hit the threshold (2 points for annual filers, 4 for quarterly, 5 for monthly)
  • Late payment: No penalty if paid within 15 days; 2% of outstanding VAT from day 16; 4% from day 31; and a further 4% annualised interest on anything overdue for more than 30 days
  • Failure to register: Penalties of between 5% and 15% of the VAT owed from the date you should have registered

VAT on digital services: the special rules

If you supply digital services (software, e-books, online courses, streaming) to consumers in the UK, you must charge UK VAT regardless of where your business is based. If you sell to consumers in EU countries post-Brexit, you may need to register for VAT in each member state or use the EU's One Stop Shop (OSS) scheme.

Making Tax Digital for VAT

All VAT-registered businesses in the UK are required to keep digital records and submit VAT returns using Making Tax Digital (MTD)-compatible software. This includes sole traders, partnerships and limited companies. Acceptable software includes Xero, QuickBooks, Sage, FreeAgent and HMRC's own bridging tools. Paper records are no longer acceptable for VAT purposes.

Frequently asked questions about UK VAT

The VAT registration threshold for 2026/27 is £90,000. This applies to your rolling 12-month taxable turnover, not your calendar year or financial year. If your taxable turnover exceeds £90,000 in any consecutive 12-month period, you must register for VAT with HMRC within 30 days of the end of the month in which the threshold was breached.
Yes. You can register for VAT voluntarily at any time, even if your turnover is well below £90,000. This can be beneficial if you have significant VAT-able costs you want to reclaim, or if your clients are VAT-registered and can reclaim the VAT you charge them. The main downside is the additional administrative burden of submitting quarterly VAT returns.
Zero-rated supplies are technically VATable but charged at 0%, they count towards your registration threshold and you can reclaim input VAT on related costs. Exempt supplies fall outside the VAT system entirely — they do not count towards the threshold and you cannot reclaim input VAT on costs associated with making exempt supplies. Common exempt supplies include financial services, insurance, education and healthcare.
Most VAT-registered businesses submit quarterly VAT returns. However, you can apply for monthly returns if you regularly receive VAT repayments (for example, if you make mainly zero-rated or export sales). Annual accounting is available for businesses with a turnover below £1.35 million — you make monthly estimated payments during the year and submit one annual return.
The flat rate scheme is most beneficial for service-based businesses with low VAT-able purchases. Use the flat rate scheme tab in the calculator above to compare your actual position. As a rule of thumb, if your VAT-able purchases are less than the sector flat rate percentage of your gross turnover, the standard scheme is likely better. If you are classified as a limited cost trader (purchases below 2% of turnover or £1,000 per year), the 16.5% rate usually makes the standard scheme more advantageous.
If you fail to register for VAT on time, HMRC will charge a penalty ranging from 5% to 15% of the VAT you owed from the date you should have registered. The penalty increases with the length of the delay. You will also owe the VAT itself, which you may struggle to recover from customers if you did not charge it at the time. It is always better to register early if you are approaching the threshold.
Yes, subject to conditions. You can reclaim input VAT on goods purchased up to 4 years before your VAT registration date, provided the goods are still on hand and used in your VAT-registered business. For services, the limit is 6 months before registration. You will need valid VAT invoices as evidence of the VAT paid.
For B2B services sold to VAT-registered businesses in other countries, the general rule is that VAT is charged in the customer's country, so you do not charge UK VAT and the transaction is outside the scope of UK VAT (though it may still count towards your UK threshold). For B2C services to consumers outside the UK, different rules apply depending on the type of service. Always seek advice for cross-border VAT as the rules are complex and change frequently.
All VAT-registered businesses must use MTD-compatible software to keep digital records and submit VAT returns. Popular options include Xero, QuickBooks, Sage, FreeAgent, and Kashflow. HMRC also maintains a list of approved software on their website. Spreadsheets can be used but must be linked to HMRC's systems via bridging software.
You can apply to deregister for VAT if your taxable turnover falls below the deregistration threshold of £88,000. Note this is £2,000 lower than the registration threshold, this gap prevents businesses from constantly registering and deregistering as their turnover fluctuates around the limit. You can also deregister if you cease making VATable supplies.

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