This is general information about UK rules, checked on the date above. It is not legal advice, and rules change. For a decision that matters, check the sources below or ask a qualified adviser.
Twenty per cent is a big difference to a customer. A quote that says “£1,000” and an invoice that says “£1,200” is one of the fastest ways to lose goodwill on a finished job. The VAT rules are detailed, but the part that matters when you are quoting is manageable.
The short version
- You must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or you expect it to in the next 30 days.1
- You can choose to register voluntarily below that level.1
- VAT invoices must include your VAT number and show the VAT separately.2
- If a price already includes VAT, the VAT part is a fraction of the total, not 20% of it.3
Do you need to charge VAT at all?
You must register if your total taxable turnover for the last 12 months goes over £90,000, the VAT threshold, or you expect it to go over £90,000 in the next 30 days.1 If you are close to that level, it pays to keep an eye on your rolling 12-month total, not just your turnover for the tax year. Registering is a change your customers will feel, so plan for how you will explain the price rise.
If you are not registered, do not add VAT to your quotes.
What to put on a quote
The law sets out what a VAT invoice must include, and HMRC’s guide is the authority on that. Quotes are less formal, so here is our practical suggestion: always answer the question the customer is really asking, which is “what will I actually pay?”
| Your customers are | Our suggested wording |
|---|---|
| Members of the public | “£1,200 including VAT.” Lead with the total they will pay |
| Businesses that reclaim VAT | “£1,000 plus VAT at 20% (£200). Total £1,200.” |
| Mixed | Show the net, the VAT and the total as three separate lines |
Showing all three lines is the safest default. It helps everyone: consumers look at the total, while business customers look at the net price and the VAT they can reclaim.
The Competition and Markets Authority has published guidance on unfair commercial practices, updated in November 2025 to reflect its guidance on price transparency.4 If you advertise or quote prices to consumers, it is worth reading.
Working out the VAT inside a price
This catches people out when a customer asks for a breakdown. HMRC’s VAT guide explains that tax is normally calculated at the appropriate percentage of a price decided without VAT. When VAT is already included in the price, you need the VAT fraction instead.3
At the standard rate, the VAT inside a VAT-inclusive price is one-sixth of the total. HMRC’s example is a price of £2.40, where the VAT is 40 pence, which is one-sixth of £2.40 and not 20% of it.3
| Total including VAT | Wrong: 20% of total | Right: one-sixth of total | Price before VAT |
|---|---|---|---|
| £1,200 | £240 | £200 | £1,000 |
| £600 | £120 | £100 | £500 |
| £2.40 | 48p | 40p | £2.00 |
If you get this wrong, you may either overstate or understate the VAT, and your books will not match.
Once the job is done
After the customer accepts and the work is done, you usually raise an invoice. If you are VAT registered, it must include your VAT number and display the VAT separately.2 HMRC’s guide to charging, reclaiming and recording VAT sets out what else you need to record.2
Different rates and special schemes exist, for example for certain types of building work. If you do mixed work, check which rate applies to each part, and ask your accountant if unsure. The figures in this article use the standard 20% rate for illustration.
Avoiding the surprise
These are the simple habits we recommend:
- Decide your default. Pick one way of showing prices and use it on your website, quotes and invoices.
- Say it in words. “Including VAT” or “plus VAT” should appear next to every total.
- Keep the sums in one place. Calculating VAT by hand on each quote is where errors creep in.
- Check at registration. If you register for VAT mid-year, review any quotes still open. The wording you used may affect who bears the difference, so take advice.
- Plan the threshold. A sudden jump in price is hard to explain, so tell regular customers before it happens.
Doing this automatically
A quoting tool applies the same rule every time. In our quick quotes demo, the total shown already includes VAT, and the wording tells the customer so. In a real build we set it up to match your VAT position and your customers. For the wider picture of what a quote commits you to, see quote or estimate.
Sources
-
GOV.UK, Register for VAT: when to register, accessed 7 November 2026. ↩ ↩2 ↩3
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GOV.UK, Charge, reclaim and record VAT, accessed 7 November 2026. ↩ ↩2 ↩3
-
HMRC, VAT guide (VAT Notice 700), accessed 7 November 2026. ↩ ↩2 ↩3
-
Competition and Markets Authority, Unfair commercial practices (CMA207), updated 18 November 2025, accessed 7 November 2026. ↩
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