How much VAT do I charge customers and pay HMRC?

Full answer

Once registered you charge output VAT on your taxable sales at the right rate: 20% standard, 5% reduced (for example domestic fuel and power), or 0% zero-rated (for example most food and children's clothing). You reclaim input VAT on business purchases. The VAT you owe HMRC each period is output tax minus input tax. Worked example: in a quarter a small consultancy makes GBP 40,000 of standard-rated sales, so output VAT is GBP 40,000 x 20% = GBP 8,000. It buys equipment and services with GBP 1,500 of recoverable input VAT. The net VAT payable to HMRC is GBP 8,000 - GBP 1,500 = GBP 6,500. To find the VAT inside a gross figure, divide by 6: a GBP 1,200 gross invoice contains GBP 200 of VAT (GBP 1,200 / 6). Most businesses file VAT Returns quarterly under Making Tax Digital using compatible software. Zero-rated sales still count as taxable supplies, so they go on your return and toward the GBP 90,000 registration threshold, even though no VAT is added. Exempt supplies (such as some financial services) are different and can restrict how much input VAT you reclaim. The VAT calculator quickly adds 20% to a net price, strips VAT out of a gross price, or works out the reduced rate. For sector-specific rates, partial exemption, and the exact list of zero-rated and exempt items, check gov.uk, as rate categories are detailed and occasionally change.

Try the calculator