Key takeaways
- To find the VAT in a price that includes VAT at 20%, multiply the gross price by 1/6 (or divide it by 6).
- The VAT fraction is the rate divided by (100 + rate), so 20% gives 20/120, which is 1/6, according to HMRC's VAT Notice 700.
- For goods and services at the 5% reduced rate, the VAT fraction is 1/21.
- To find the net price from a gross price at 20%, divide by 1.2; £120 including VAT is £100 net plus £20 VAT.
- Taking 20% of a VAT-inclusive price is wrong: on £120 it gives £24 instead of the correct £20.
- Invoice traders may round the total VAT on an invoice down to the whole penny, but retailers calculating VAT line by line must not round down, under Notice 700 section 17.
- The UK standard rate has been 20% since 4 January 2011; before that, at 17.5%, the VAT fraction was 7/47.
To work out the VAT inside a price that already includes VAT at 20%, multiply the price by 1/6. HMRC calls this the VAT fraction, and it works because 20% of the net price is one sixth of the gross price. For the 5% reduced rate, the fraction is 1/21.
What is the VAT fraction?
The VAT fraction is the share of a VAT-inclusive price that is VAT. HMRC’s VAT Notice 700, paragraph 7.3.1, defines it as the rate of tax divided by 100 plus the rate of tax.
At the standard rate that is 20/120, which simplifies to 1/6. The standard rate is set at 20% by section 2 of the Value Added Tax Act 1994.
| VAT rate | Fraction of gross price | Divide gross by |
|---|---|---|
| 20% (standard) | 1/6 | 1.2 for net |
| 5% (reduced) | 1/21 | 1.05 for net |
| 0% (zero) | None | No VAT to remove |
The current rates are listed on GOV.UK’s VAT rates page. Our VAT rates A to Z shows which rate applies to common goods and services.
How do you work out VAT from a VAT-inclusive price?
You multiply the gross price by the VAT fraction to get the VAT, then subtract the VAT to get the net price. Follow these steps:
- Check the rate. Confirm whether the supply is standard rated, reduced rated or zero rated.
- Take the gross price. This is the amount the customer pays, including VAT.
- Apply the fraction. Divide by 6 at 20%, or by 21 at 5%. The answer is the VAT.
- Subtract the VAT. Gross price minus VAT is the net price.
- Check your answer. Net price multiplied by 1.2 (or 1.05) should give the gross price back.
You can also run the numbers in our VAT calculator, which adds or removes VAT at either rate.
Worked examples
These examples use the fractions above and are checked by multiplying back.
| Gross price | VAT | Net price |
|---|---|---|
| £120 at 20% | £20.00 | £100.00 |
| £2.40 at 20% | £0.40 | £2.00 |
| £50 at 20% | £8.33 | £41.67 |
| £105 at 5% | £5.00 | £100.00 |
| £630 at 5% | £30.00 | £600.00 |
The £2.40 example comes from Notice 700 itself, which says the VAT on a £2.40 sale at 20% is 40 pence. The £50 example does not divide exactly: one sixth is £8.333, which rounds to £8.33.
Why is 20% of the gross price wrong?
Taking 20% of a VAT-inclusive price overstates the VAT, because the 20% was charged on the net price, not the gross. On a £120 price, 20% gives £24, but the VAT is only £20.
It is a common mistake when reclaiming VAT from till receipts. Our guide to how to calculate VAT covers adding VAT to a net price, which is the opposite calculation.
How should you round VAT?
HMRC allows rounding, but the rules depend on whether you are an invoice trader or a retailer. Notice 700 section 17 sets them out.
- Invoice traders, whole invoice: you may round the total VAT on a VAT invoice down to a whole penny and ignore any fraction of a penny (paragraph 17.5).
- Invoice traders, line by line: you may round each line down to the nearest 0.1p, or to the nearest 1p or 0.5p, as long as you are consistent (paragraph 17.5.1).
- Unit prices: work to four decimal places and round to three, or round to the nearest 1p or 0.5p; you must not round VAT on a standard or reduced rated unit down to nil (paragraph 17.5.2).
- Retailers not using a retail scheme: you must not round the VAT figure down, but you may round each calculation up or down (paragraph 17.6).
Most retailers use a retail scheme under VAT Notice 727, which applies the 1/6 and 1/21 fractions to total gross takings rather than each sale.
Which calculation applies to you?
The method depends on what your price already includes.
- If the price includes VAT (a till receipt, a shelf price, a less detailed invoice), multiply by 1/6 or 1/21 to find the VAT.
- If the price excludes VAT (a quote marked “plus VAT”), multiply by 20% or 5% to find the VAT. See plus VAT explained.
- If you use the Flat Rate Scheme, you do not use the VAT fraction on sales. You pay a flat percentage of your VAT-inclusive turnover instead. See our VAT Flat Rate Scheme guide.
- If you hold a less detailed (simplified) invoice for £250 or less, it shows only the gross total and rate, so use the VAT fraction to work out the input tax to claim.
What to do now
Test one receipt by hand to check your bookkeeping software applies the fraction to gross entries. If you have been taking 20% of gross figures, correct the overclaim using HMRC’s VAT error correction rules.
Frequently asked questions
What is 1/6 VAT?
It is the VAT fraction for the 20% standard rate. One sixth of a VAT-inclusive price is the VAT, so a £60 price includes £10 of VAT.
How do I remove VAT from a price?
Divide the gross price by 1.2 for the standard rate, or by 1.05 for the reduced rate. The answer is the net price, and the difference is the VAT.
What is the VAT fraction for 5%?
It is 1/21, because 5 divided by 105 is one twenty-first. A £105 price at 5% includes £5 of VAT.
Why is the VAT fraction not 1/5?
The 20% is charged on the net price, so the VAT is 20 parts out of a gross of 120. That is 1/6 of the gross. The fraction would be 1/5 only at a 25% rate.
What was the VAT fraction at 17.5%?
It was 7/47. The standard rate rose from 17.5% to 20% on 4 January 2011, and the fraction became 1/6.
Can I round VAT down?
Invoice traders can round the total VAT on an invoice down to a whole penny. Retailers working out VAT at line or invoice level outside a retail scheme must not round down.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 6 November 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.