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VAT calculator: add 20% or take the VAT out of a total, with the one-sixth rule
Add VAT to a price or take it out of a total in one step. Why taking 20% off a VAT-inclusive total gives the wrong answer, with the fix.
There are two VAT sums a trades firm does every week. Adding VAT to a price is easy. Taking the VAT back out of a total that already includes it is where people go wrong. One electricians' forum thread asking how to work out the VAT in an invoice has been read about 33,000 times since it was posted in 2011. Here is the calculator, and the reason the obvious method fails.
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Why you cannot just take 20% off
Say a supplier invoice comes to £1,200 including VAT at 20%. The tempting sum is 20% of £1,200, which is £240. That is wrong.
The £1,200 is the price plus 20% of the price. So the price is £1,000 and the VAT is £200. The 20% was worked out on £1,000, not on £1,200. Taking 20% of the total counts VAT on the VAT.
The fix is a fraction. At 20%, the VAT in any total is one sixth of it: £1,200 divided by 6 is £200. At the reduced rate of 5%, it is one twenty-first: £1,050 divided by 21 is £50. HMRC calls this the VAT fraction.
AI staff and workflows for trades and building firms. Starting with enquiry to quote.See what we would set up| Total including VAT | Wrong (20% of total) | Right (one sixth) | Overstated by |
|---|---|---|---|
| £120 | £24.00 | £20.00 | £4.00 |
| £1,200 | £240.00 | £200.00 | £40.00 |
| £4,800 | £960.00 | £800.00 | £160.00 |
If you reclaim VAT on purchases using the wrong method, you overclaim, and HMRC will want it back. If you price a job by taking 20% off a figure you thought included VAT, you undercharge.
When to add VAT and when to take it out
Adding VAT. When you quote a business customer, you usually quote before VAT and add it. A £1,000 job becomes £1,200 at 20%. For householders, quote the full price including VAT, because that is what they will pay. Our guide to writing quotes that get followed up covers how to show it.
Taking it out. You take VAT out when you only have the total: a receipt from the merchants, a price a customer agreed "all in", or a card payment. Use the calculator with "Take VAT out".
Reclaiming VAT on materials
When you buy cable, timber or plaster from the merchants, the VAT on the receipt is VAT you can usually reclaim, if you are registered. Work it out with the one-sixth rule, not 20% of the total. Keep the VAT invoice or receipt the merchant gives you: to reclaim VAT you need a valid VAT invoice, and a card statement does not count. Most merchants will email a VAT invoice for trade accounts if you ask at the counter.
Which rate applies
Most building and electrical work is at the standard 20%. Some work is at 5%, such as certain energy-saving installations and some conversion work on homes, and some new-build work on homes is zero-rated. The rules are specific about what qualifies. If you are not sure, check HMRC's guidance on buildings and construction before you invoice, not after.
AI staff and workflows for trades and building firms. Starting with enquiry to quote.See what we would set upIf you work for contractors under CIS, the VAT may not be paid to you at all because of the domestic reverse charge. The CIS deduction calculator shows how that works with the deduction.
Are you registered?
You only charge VAT if you are VAT registered. You must register when your taxable turnover over any rolling 12 months goes over the threshold, which is £90,000. Our guide on the rolling 12 months for a tradesperson works through when that happens. If you are not registered, do not show VAT on your invoices.
This is general information, not tax advice. Ask your accountant if a job's VAT rate is unclear.
Short answers from this page
How do I take the VAT out of a total price?
Divide the total by 6 for 20% VAT. Do not take 20% off: on a £1,200 total that gives £240, but the VAT is £200 and the net price £1,000. The mistake overstates the VAT by £40 on every £1,200.
Source: HMRC VAT fraction for 20% (1/6)
Where this comes from: Our sums, saved in tests/gaffer/tools-check.txt; VAT rates from GOV.UK "VAT rates", read 2026-10-01. The forum thread "Calculating 20% VAT content of an invoice?" on ElectriciansForums.net had about 33,000 views when read on 2026-10-01.
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