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Chapter 3

Calculating VAT and issuing VAT invoices

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Small business guides > Quick guide to VAT > Calculating VAT and issuing VAT invoices

Calculating VAT and issuing VAT invoices

If you’re a VAT-registered business you must add VAT to your prices. You also need to issue VAT invoices to customers.

Let’s take a look at the maths and requirements of both.

How to add VAT to prices

There’s a very simple formula for each VAT rate. You multiply your price by 1.05 for a 5% VAT rate, by 1.20 for a 20% VAT rate, or leave the price as is for a 0% VAT rate.

How to calculate VAT

You don’t add any VAT to out-of-scope or VAT-exempt products or services that you might sell. 

What are VAT invoices?

A VAT invoice tells a customer how much VAT they paid on a purchase. It’s important information because some of your customers may be able to claim that tax back. If you’re VAT registered, you must issue VAT invoices.

VAT invoice example

Here are the details you need to provide on a VAT invoice.

How to issue a VAT invoice

VAT tax point

If you’re issuing an invoice more than two weeks after goods or services were delivered, add an extra line to your invoice saying ‘VAT tax point’ with the date of delivery next to it. This can help your business customers claim the VAT back sooner.

Chapter 4: Claiming VAT

Find out about the VAT you can claim back from HMRC on business expenses and on VAT you’ve already paid.

Read next chapter

This guide is intended as general information only. Always check with a professional for advice.

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