Rounding VAT down on an invoice
Yes, if you issue VAT invoices. HMRC's long-standing concession allows the VAT payable on an invoice to be rounded down to a whole penny, on the grounds that it is tax-neutral: your output tax and your customer's input tax move together, so the Exchequer collects the same. It is a concession for invoice traders rather than the general rule, and it does not extend to a retailer computing VAT from gross takings. Switch the rounding option and the difference is one penny per line — which is one penny per line, every line, all year.
The same amount in each UK band
| Standard | 20.00% | 1/6 | £150.00 | £29.99 | £179.99 |
| Reduced | 5.00% | 1/21 | £171.42 | £8.57 | £179.99 |
| Zero-rated | 0.00% | 0 | £179.99 | £0.00 | £179.99 |
An estimate, not legal advice. Rules vary by jurisdiction and change over time. Check the current position with a qualified professional before relying on it.
The concession applies to traders issuing VAT invoices, not to retail schemes computing tax from gross takings.
It is optional. Rounding to the nearest penny is always acceptable, and mixing the two within one invoice is not.
On 179.99 including VAT at 20% the tax is 30.00 rounded to the nearest and 29.99 rounded down — a penny, on every line it touches.
How it works
The formula
Adding VAT to a price that excludes it:
vat = round(net x rate / 100)
gross = net + vat
Removing VAT from a price that includes it:
vat = round(gross x rate / (100 + rate))
net = gross - vat
UK bands and their VAT fractions:
standard 20% 20/120 = 1/6
reduced 5% 5/105 = 1/21
zero 0% no tax
round = to the nearest penny, or towards zero when the
invoice trader's concession is chosen
Only the VAT is rounded. The third figure is derived from
the other two, so net + vat = gross to the penny, always.
What it assumes
- The three bands are the rates in force. Which band a supply falls in is a question about the supply rather than about arithmetic, and HMRC publishes the lists — this tool applies a rate, it does not classify goods.
- Rounding is applied to the VAT and the third figure is derived from the other two. Rounding all three independently leaves them a penny apart whenever both halves land on a half-penny, which is how an invoice fails to add to its own total.
- The rounding concession is written for traders issuing VAT invoices. It is not the general rule and not a retail scheme, which is why it is off by default.
- Historic rates are not held here. The standard rate was 17.5% until 3 January 2011 and 15% for thirteen months before that, and those go in the "Another rate" field — which starts on 17.5 because re-checking an old invoice is the usual reason to need it.
- Figures are in pounds because UK VAT is denominated in pounds. Nothing is converted and no exchange rate is applied anywhere.
Common questions
Does rounding down apply per line or to the invoice total?
Per line. VAT is calculated and rounded on each line of the invoice, and the total is then the sum of those rounded amounts. Computing full-precision tax down the whole invoice and rounding once at the bottom gives a total that does not reconcile against the lines printed above it, which is the usual cause of a penny's disagreement with a customer's own ledger.
Can a retailer use the concession?
Not in the same form. The concession is written for traders who issue VAT invoices for goods and services at a price excluding VAT. A retailer working from gross takings under a retail scheme calculates VAT differently and rounds according to that scheme's own rules, so the round-down option here is not the right model for till receipts.
Sources
Method written and checked by Tessalor on Jul 31, 2026.
The full method, worked example and every assumption behind this figure are on UK VAT Calculator.