The three rates
Most sales are standard-rated at 20%. A reduced rate of 5% applies to things such as domestic fuel and power. Zero-rated items, including most food and children's clothes, carry VAT at 0%.
| Rate | % | Examples |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced | 5% | Home energy, children's car seats |
| Zero | 0% | Most food, children's clothes, books |
When you must register
You must register if your taxable turnover goes over £90,000 in any rolling 12-month period, or you expect it to exceed £90,000 in the next 30 days alone. You can deregister if you expect turnover to fall below £88,000.
Adding and removing VAT
To add 20%, multiply the net price by 1.2. To remove it, divide the gross price by 1.2. So £120 including VAT is £100 plus £20 VAT, not £96 plus £24.
The Flat Rate Scheme
Under the scheme you pay HMRC a fixed percentage of your VAT-inclusive turnover, set by business type, and generally can't reclaim VAT on purchases. You can join if you expect turnover of £150,000 or less excluding VAT, and must leave once VAT-inclusive turnover passes £230,000.
If you spend less than 2% of turnover, or under £1,000 a year, on goods, you're a limited cost trader and pay 16.5%. New registrations get a 1% discount for the first year.
Use the VAT Flat Rate Scheme Calculator to see what you would save
Be clear about which price you mean
Label quotes and working figures as VAT-inclusive or VAT-exclusive. Otherwise a price comparison can mistake VAT for a change in the value of the underlying goods or services.
Try it with your own numbers
Add or remove UK VAT at 20%, 5% or 0%, check your turnover against the £90,000 registration threshold, and compare the Flat Rate Scheme with standard VAT accounting.
Frequently asked questions
Do zero-rated sales count towards the threshold?
Yes. Zero-rated sales are taxable, so they count. Exempt sales don't.
Check it on GOV.UK: Income Tax rates and allowances (opens GOV.UK in a new tab)
Can I reclaim VAT before I registered?
Usually on goods you still hold bought up to four years before registration, and on services bought up to six months before, if they were for the business.
Check it on GOV.UK: VAT rates (opens GOV.UK in a new tab) · Register for VAT (opens GOV.UK in a new tab)
Sources
Tax year 2026/27. Check these official sources for current rules and deadlines.
Related calculators
- VAT Calculator — Add or remove UK VAT at 20%, 5% or 0%, check your turnover against the £90,000 registration threshold, and compare the Flat Rate Scheme with standard VAT accounting.
- VAT Flat Rate Scheme Calculator — Enter your VAT rate, turnover and costs to see how much the VAT Flat Rate Scheme would save or cost you compared with standard VAT accounting.
- Self Employed Tax Calculator — Estimate Income Tax and Class 4 National Insurance on self-employed profits for 2026/27, including other employment income.
- Corporation Tax Calculator — Calculate UK Corporation Tax at 19% or 25% with marginal relief for profits between £50,000 and £250,000.
Related guides
- Tax for the Self-Employed — How sole traders are taxed in the UK: Income Tax on profit, Class 4 NI, allowable expenses and payments on account.
- Corporation Tax Explained — How UK limited companies pay Corporation Tax: the 19% small profits rate, 25% main rate, marginal relief between £50,000 and £250,000, and how VAT fits alongside it.
- Self Assessment Explained — Who needs to file a Self Assessment tax return, what goes on it, the deadlines for 2026/27 and the penalties for missing them.