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VAT Profit Calculator

Updated August 2026 Last reviewed 10 August 2026 VAT GOV.UK VAT accounting

For a VAT-registered business, the VAT you charge on sales (output VAT) is offset by the VAT you reclaim on purchases (input VAT). What is left goes to HMRC — and the profit sits underneath it all.

Enter your gross sales and your net purchase costs to see the full picture.

Your details

Enter net — the VAT on these is reclaimed

Results

Net profit
£6,000.00
60.0% of net sales
VAT to pay HMRC
£1,200.00
Using the standard rate (20%)
Net sales (ex-VAT)
£10,000.00
Output VAT charged
£2,000.00
Input VAT reclaimed
£800.00

How the calculation works

We believe numbers should be transparent. Here is the formula behind this calculator.

Net sales = sales ÷ (1 + rate) · Output VAT = net sales × rate · VAT to pay = output VAT − input VAT · Net profit = net sales − net purchases

Worked example

Worked example: £12,000 sales, £4,000 purchases

Net sales: £12,000 ÷ 1.2 = £10,000. Output VAT: £2,000.
Input VAT on £4,000 of purchases: £800.
VAT to HMRC: £2,000 − £800 = £1,200. Net profit: £10,000 − £4,000 = £6,000.

Important assumptions

  • Assumes all your sales are at one VAT rate and all purchases qualify for VAT reclaim.
  • If input VAT exceeds output VAT (early trading, heavy investment), HMRC pays you the difference.
  • Flat Rate Scheme users pay a fixed percentage of turnover instead — this calculator uses the standard scheme.

Rates & official sources

Every calculation is based on the official rates and rules published by GOV.UK and HMRC.

GOV.UK VAT accounting gov.uk

Frequently asked questions

What is output VAT and input VAT?

Output VAT is what you charge customers on your sales. Input VAT is what you pay on business purchases. Each quarter you pay HMRC the output VAT minus the input VAT.

How do I reclaim VAT on purchases?

Keep valid VAT invoices for your business purchases and include them on your VAT return. You can only reclaim VAT on goods and services used for your VAT-taxable business.

Is VAT a cost to my business?

No. You collect VAT from customers and pass it to HMRC, offsetting what you paid on purchases. That is why this calculator separates the VAT from your true net profit.

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Related guides

New to the topic? Read a plain-English guide on vat, with worked examples and tips.

Business

How VAT works

When to register, what to charge and how to reclaim VAT.

Read the guide

These calculations are estimates for guidance only and are not professional financial, tax or legal advice. UK rates and rules change, so always verify important figures with official GOV.UK / HMRC information or speak to a qualified professional. See our full disclaimer.