Updated April 2026 · Kael Tripton · Finance Guide

Important: This guide is for information only and does not constitute financial advice. Mortgage rates change daily. Always get personalised advice from an FCA-regulated whole-of-market mortgage broker. Your home may be repossessed if you do not keep up repayments on your mortgage.

UK VAT Calculator 2026 - How VAT Works for UK Businesses

Value Added Tax (VAT) is a consumption tax levied on most goods and services sold in the UK. The standard rate is 20%. Understanding how VAT works - when you must register, how to calculate VAT on sales and purchases, and how to reclaim input VAT - is essential for any UK business approaching or exceeding the registration threshold.

VAT Registration Threshold 2026

The VAT registration threshold in 2026 is 90,000 of taxable turnover in any rolling 12-month period. This threshold was increased from 85,000 to 90,000 in April 2024 and remains at 90,000 for 2025-26. You must register for VAT with HMRC within 30 days of the end of the month in which your turnover exceeded 90,000.

You can also register voluntarily below the threshold - advantageous if you supply VAT-registered businesses (who can reclaim the VAT you charge) and you incur significant VAT on business purchases (which you can reclaim as input VAT).

VAT Rates in the UK 2026

How to Calculate VAT

Adding VAT (net to gross): Multiply the net price by 1.20 for standard rate. Example: 100 net + 20% VAT = 120 gross.

Removing VAT (gross to net): Divide the gross price by 1.20 for standard rate. Example: 120 gross divided by 1.20 = 100 net. VAT amount = 20.

VAT fraction for extracting VAT from gross price: Standard rate: multiply by 1/6 (or divide by 6). Example: 120 x 1/6 = 20 VAT.

Most UK accounting software (QuickBooks, Xero, FreeAgent) handles VAT calculations automatically and is Making Tax Digital compliant.

Making Tax Digital for VAT

Making Tax Digital (MTD) for VAT requires all VAT-registered businesses to keep digital VAT records and submit VAT returns using HMRC-compatible software. MTD for VAT has applied to all VAT-registered businesses since April 2022. Compatible software includes Xero, QuickBooks, Sage, and FreeAgent. Paper VAT returns are no longer accepted.

Frequently Asked Questions

When must I register for VAT?

You must register within 30 days of the end of the month in which your taxable turnover exceeded 90,000 in the previous 12 months. Register at gov.uk/vat-registration.

Can I deregister from VAT?

You can deregister if your taxable turnover falls below the deregistration threshold, which is 88,000 in 2025-26. Apply to deregister voluntarily if your turnover has fallen below this level. Contact HMRC or your accountant.

What is the Flat Rate Scheme?

The VAT Flat Rate Scheme allows eligible small businesses with taxable turnover under 150,000 excluding VAT to pay a flat percentage of gross turnover to HMRC instead of calculating VAT on each transaction. The percentage varies by trade sector. It simplifies administration but may not always result in lower VAT payments.

Do I charge VAT on exports?

Goods exported outside the UK are generally zero-rated for VAT - you do not charge VAT to the overseas customer, but you can still reclaim input VAT on related purchases. International VAT rules are complex - seek specialist advice for significant international trading.

Conclusion

VAT registration is compulsory once your taxable turnover exceeds 90,000 in any rolling 12-month period. The standard rate is 20%. All VAT-registered businesses must use Making Tax Digital compatible software for records and returns. For personalised VAT advice, consult an accountant or visit gov.uk/vat-businesses for HMRCs official guidance.

Last updated: April 2026. Rate data sourced from HomeOwners Alliance, Rightmove, and lender published rates April 2026. Rates change daily - always verify before applying. For free impartial guidance visit MoneyHelper.