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Partial exemption calculator

Standard method and de minimis tests from HMRC VAT Notice 706. Nothing you type leaves your browser.

Who is partially exempt

  • Businesses that make both taxable supplies, which carry VAT at any rate including 0%, and exempt supplies, such as most residential lettings, insurance, finance and some education and health services.
  • Examples include landlords with commercial and residential property, financial advisers who also sell insurance, and training providers with both taxable and exempt courses.

The three steps to work out what you can reclaim

  1. Direct attribution: VAT on costs used only for taxable supplies is reclaimable. VAT on costs used only for exempt supplies is not, unless you are de minimis.
  2. Apportion the residual VAT: VAT on shared costs, such as rent or accountancy fees, is split. Under the standard method, the reclaimable share is your taxable supplies divided by your total supplies, rounded up to the next whole number. If your residual VAT is more than £400,000 a month on average, round to 2 decimal places instead.
  3. Annual adjustment: at the end of your partial exemption year, redo the calculation using the whole year's figures and correct any difference on a later return.

The de minimis limits

TestYou pass if
Full de minimis testExempt input tax is no more than £625 a month on average, and no more than half of your total input tax
Simplified Test OneTotal input tax is no more than £625 a month on average, and exempt supplies are no more than 50% of all supplies
Simplified Test TwoTotal input tax, less input tax directly attributable to taxable supplies, is no more than £625 a month on average, and exempt supplies are no more than 50% of all supplies

Both conditions must be met in each test. If you pass, you can treat yourself as fully taxable and reclaim all your input tax for that period, then review the position at the annual adjustment.

When to use a special method

If the standard method does not fairly reflect how your costs are used, you can apply to HMRC for a special method, for example one based on floor space, staff time or transactions. You need HMRC's approval before you use it. HMRC can also require you to adjust if the standard method gives a result that is substantially unfair.

Common partial exemption mistakes

  • Reclaiming all the VAT on shared costs without apportioning it.
  • Forgetting the annual adjustment.
  • Including the value of capital items, such as a building you sold, in the standard method calculation.
  • Assuming you are de minimis without checking both conditions.

Filing as a partially exempt business

Your VAT return still has the same nine boxes. Box 4 shows only the input tax you can reclaim after the calculation, and Box 6 includes both your taxable and exempt sales. Swift VAT Pro files the result from your spreadsheet: keep the calculation in its own tab, total Box 4 by formula, and upload the CSV.

Calculation done? File the return from your spreadsheet, from £5 a month

Keep your partial exemption calculation in its own tab, total Box 4 by formula, upload the CSV and submit.

  1. Connect to HMRC on HMRC's own page with your Government Gateway sign-in. We never see that password.
  2. See your VAT periods, due dates, amounts owed and payments, read from HMRC.
  3. Upload your nine box totals as a CSV. Box 3 and Box 5 are worked out and every box is checked.
  4. Submit and keep HMRC's receipt. Reminder emails arrive before each due date.
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Final thoughts

Partial exemption comes down to three steps: attribute what you can, apportion the rest by the standard method, and check the de minimis limits. Run the calculation each return and adjust at the end of the year.

Disclaimer: This guide gives general information, not advice for your business. Partial exemption can be complex. Speak to an accountant or contact HMRC if you are unsure.

Frequently asked questions

Checked against HMRC VAT Notice 706 (partial exemption), including the de minimis limits, simplified tests and rounding rules. November 2026.

What is partial exemption for VAT?
A business is partially exempt when it makes both taxable and exempt supplies. It can reclaim VAT on costs used for taxable supplies, but not on costs used for exempt supplies, unless the exempt amount is below the de minimis limits.

How is the standard method calculated?
Divide the value of taxable supplies by the value of all supplies, excluding VAT and certain items such as capital assets. Round up to the next whole percentage and apply it to your residual input tax.

What are the de minimis limits?
You can reclaim all your input tax if your exempt input tax is no more than £625 a month on average and no more than half of your total input tax. Both conditions must be met.

What are the simplified de minimis tests?
Test One: total input tax no more than £625 a month on average and exempt supplies no more than 50% of all supplies. Test Two: total input tax less input tax directly attributable to taxable supplies no more than £625 a month on average, and exempt supplies no more than 50%.

What is the partial exemption annual adjustment?
At the end of your partial exemption year, you redo the calculation using the whole year's figures and correct any difference on a later VAT return.

Calculation done? File the return from your spreadsheet, from £5 a month.

Swift VAT Pro files your return to HMRC from the spreadsheet you already keep. From £5 a month.

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