How the VAT Calculator Works
VAT stands for value added tax. It is a tax on sales that is used in many countries, including the United Kingdom and most of Europe. A business adds VAT to its price, and the customer pays it. The VAT Calculator works out the VAT on a price. It can also take VAT out of a price that already includes it, which is the part that people often get wrong.
Net, VAT and gross
- Net price: the price without VAT.
- VAT amount: the tax itself.
- Gross price: the price with VAT. It is the net price plus the VAT amount, and it is what the customer pays.
What you enter
- The amount you know.
- The VAT rate as a percentage, such as 20.
- What the amount is: a price without VAT (net), or a price with VAT (gross).
How the results are worked out
To add VAT to a net price:
VAT amount = net price x rate / 100 gross price = net price + VAT amount = net price x (1 + rate / 100)
To take VAT out of a gross price:
net price = gross price / (1 + rate / 100) VAT amount = gross price - net price
Notice that you divide, and you do not simply subtract a percentage. The VAT was added to the net price, so it is a percentage of the net price, not of the gross price.
Example 1: adding VAT
A price is 100.00 without VAT, and the VAT rate is 20%.
| Result | Amount |
|---|---|
| Net price | 100.00 |
| VAT (100.00 x 20%) | 20.00 |
| Gross price | 120.00 |
Chart: what the customer pays
Net price ██████████████████████████████████ 100.00 VAT ███████ 20.00 Gross ████████████████████████████████████████ 120.00
Example 2: removing VAT
A price is 250.00 with VAT included, and the VAT rate is 20%.
| Result | Amount |
|---|---|
| Gross price | 250.00 |
| Net price (250.00 / 1.20) | 208.33 |
| VAT (250.00 - 208.33) | 41.67 |
A common mistake is to take 20% of 250.00, which gives 50.00. That is wrong. The correct VAT is 41.67. At a rate of 20%, the VAT is always one sixth (16.67%) of the gross price, because 20 / 120 = 1/6.
The VAT share of the gross price
The share of a gross price that is VAT is rate / (100 + rate). For some common rates:
| VAT rate | Multiply the net price by | VAT share of the gross price |
|---|---|---|
| 5% | 1.05 | 4.76% |
| 10% | 1.10 | 9.09% |
| 15% | 1.15 | 13.04% |
| 19% | 1.19 | 15.97% |
| 20% | 1.20 | 16.67% |
| 21% | 1.21 | 17.36% |
| 23% | 1.23 | 18.70% |
VAT rates
Each country sets its own rates, and many have a standard rate, one or more reduced rates for goods such as food, books or energy, and a zero rate for some items. Rates change from time to time, so check the current rate with your tax authority before you use it on an invoice.
Tips
- Check which price you have. Prices in shops are usually gross. Prices between businesses are often quoted net.
- Use the right rate for the item. A single invoice can have items at different rates.
- Round the VAT on the total, or on each line, according to the rules in your country, and keep to the same method.
- Keep the VAT amount on the invoice. A VAT-registered business may need it to reclaim the VAT it has paid.
What this calculator does not include
- Special schemes, such as flat-rate, margin or reverse-charge VAT.
- Different rates on different items in one order. Work each item out separately.
- Other taxes, such as sales tax, duties or import charges.
This tool gives an estimate for general information only. It is not tax or accounting advice. Check the rules and rates with your tax authority or an accountant.