If you've ever stared at a £600 receipt and tried to work out how much of that is VAT, you've already done reverse VAT. The trick is doing it the way HMRC expects.
What "reverse VAT" actually means
"Reverse VAT" is just shorthand for working backwards from a gross figure (the VAT-inclusive total) to two separate numbers: the net amount (the bit before tax) and the VAT amount (the tax itself).
You'll see the term used a lot in three situations:
- You've been given a VAT-inclusive price and need the net for your books.
- You're checking a supplier's invoice that only quotes a gross figure.
- You're reclaiming input VAT on an expense and need the VAT element separated out.
A separate, unrelated thing called the CIS Domestic Reverse Charge shares the word "reverse" but is a completely different rule. We cover that one in its own guide.
The HMRC formula
There's only one formula and it doesn't change with the rate:
Net = Gross ÷ (1 + VAT rate / 100)
Then VAT = Gross − Net.
For the UK's three live rates, the divisor becomes:
| Rate | Divisor | Used for |
|---|---|---|
| 20% (standard) | ÷ 1.20 |
Most goods and services |
| 5% (reduced) | ÷ 1.05 |
Domestic fuel, energy-saving installations, child car seats |
| 0% (zero-rated) | ÷ 1.00 |
Books, most food, children's clothing — there's no VAT to extract |
Worked example: 20% standard rate
Let's say a supplier invoice shows £480 total with no breakdown.
- Net = 480 ÷ 1.20 = £400.00
- VAT = 480 − 400 = £80.00
Sense-check: 20% of £400 is £80, and £400 + £80 = £480. ✓
A faster mental shortcut some accountants use: divide the gross by 6 to get the VAT element at 20%. £480 ÷ 6 = £80. The maths works because 20/120 simplifies to 1/6.
Worked example: 5% reduced rate
Reduced rate is mostly domestic energy bills. Say your office gas bill is £262.50 including VAT.
- Net = 262.50 ÷ 1.05 = £250.00
- VAT = 262.50 − 250.00 = £12.50
The 1/6 trick doesn't work here. The equivalent shortcut at 5% is ÷ 21 for the VAT element (5/105 = 1/21), but at this point you're better off using the calculator.
The rounding rule (the bit most people miss)
HMRC accepts rounding to the nearest penny per line, not down. They specifically allow rounding "to the nearest 0.5p or 1p" on invoices, but the method has to be applied consistently.
The bit that catches people out: round each line individually, then sum. Don't round only the totals. Two-line invoices that round at the totals can disagree with line-by-line calculations by 1–2p, and HMRC's MTD-compatible software always works line-by-line.
For more detail, the official source is VAT Notice 700, section 17.5.
Common mistakes I see weekly
1. Multiplying gross by 0.20
480 × 0.20 = 96. Wrong. That treats £480 as the net figure. The VAT on a £480 gross is £80, not £96. The "× 0.20" formula only works on net amounts.
2. Using "÷ 1.20" on a zero-rated or exempt invoice
If the supplier's invoice has no VAT (zero-rated, exempt, or supplier not VAT-registered), there's nothing to extract. Reverse VAT is the wrong tool. Check the supplier's VAT number on their invoice — no number means no input VAT to reclaim.
3. Calculating in the wrong base for foreign currency
If you've imported and the invoice is in EUR or USD, convert to GBP using the rate on the invoice date first, then run reverse VAT on the GBP gross. HMRC will accept the published exchange rate from the day of supply.
When you'll actually need this
- Reclaiming input VAT on supplier invoices that only show a gross total — common with hospitality and travel receipts.
- Setting prices. If you've decided your customer-facing price is £29.99 and you need to know the net for margin calculations.
- Cross-checking accounting software. Quick way to verify Xero/QuickBooks didn't misclassify a purchase.
- VAT returns at quarter-end if you're doing the maths manually rather than via MTD-compatible software.
Pro tip from years of doing this
If you're VAT-registered, you'll do reverse VAT thousands of times. Bookmark the calculator on your phone and tablet, not just your desktop. The mistakes I see are almost always done in a rush on a phone.
Frequently asked questions
Is reverse VAT the same as the CIS reverse charge?
No. They share a word but they're unrelated. The CIS Domestic Reverse Charge changes who pays VAT to HMRC on construction services. Reverse VAT (the topic of this article) is just the maths to extract VAT from a gross amount. Full guide to CIS reverse charge here.
What if I'm under the VAT registration threshold?
You can't reclaim VAT on purchases at all if you're not VAT-registered, so this calculation is mostly informational. If you're approaching £90,000 turnover, read our VAT threshold 2026 guide first.
Does this work for the EU?
The formula is identical across every VAT/GST jurisdiction — you just change the rate. We have country-specific calculators for Germany (19%), France (20%), Spain (21%) and others.
Are there cases where the formula isn't right?
Two: (1) the Tour Operators' Margin Scheme uses a different calculation entirely, and (2) the Flat Rate Scheme means the VAT you owe HMRC isn't the VAT element of the gross — see our flat rate calculator. Outside those, the formula in this guide is correct.
Sources & further reading
All claims in this article are checked against the following primary sources. Last verified 1 May 2026.
- HMRC – VAT rates on different goods and services
- VAT Notice 700: the VAT guide (section 17 covers calculation and rounding)
- HMRC – VAT rates and allowances
- HMRC – Keeping VAT records
About the editorial team
Reverse VAT Calculator Editorial Team
Every article is written by a UK-qualified accountant (ACCA, FCCA, ACA or CTA) and reviewed by a second qualified team member before publication. Articles are dated, sourced from primary HMRC guidance, and updated when rules change.
Meet the teamReviewed by a second qualified accountant on 1 May 2026.
Every article is reviewed by a second qualified accountant before publication. Read more about our team.