How to Calculate VAT: Add It or Remove It
The formulas to add VAT to a net price or take it out of a gross price, with worked examples and common mistakes.
4 min read
VAT (value added tax) and sales tax come up whenever you write an invoice, check a receipt or compare a trade price with a shop price. There are only two questions you ever need to answer: what does this cost with tax added, and how much of this price is tax? Each has a one-line formula, and the second one is where most people go wrong.
Two words matter. The net amount is the price before tax. The gross amount is the price including tax, the figure a consumer actually pays. The examples below use the UK standard rate of 20%, but the formulas work for any rate.
Adding VAT to a net price
VAT = net × rate ÷ 100 and gross = net × (1 + rate ÷ 100).
Example: a job costs £250 before VAT. The VAT is 250 × 20 ÷ 100 = £50, and the gross price is 250 × 1.2 = £300.
Removing VAT from a gross price
net = gross ÷ (1 + rate ÷ 100) and VAT = gross − net.
Example: a receipt says £300 including VAT. The net price is 300 ÷ 1.2 = £250, so the VAT is £50. At 20%, the VAT is always one sixth of the gross price, a handy check. At the UK reduced rate of 5%, a £84 bill contains 84 ÷ 1.05 = £80 net and £4 VAT.
The tempting shortcut is to take 20% off the gross price: 300 × 0.8 = £240. That is wrong, because the 20% was calculated on the net price, not on the total. Always divide.
How to calculate VAT with QodeCat
The VAT Calculator does both directions and updates as you type. Nothing is sent anywhere.
- Choose Add VAT (net → gross) or Remove VAT (gross → net).
- Type the amount. Thousands separators like 1,250.50 are fine.
- Pick a preset rate (5%, 10% or 20%) or type any other rate, such as 8.875 for a US sales tax, into the custom field.
- Read the net amount, the VAT amount and the gross amount. Each has its own copy button. Results are rounded to two decimal places.
The mode, amount and rate are kept in the page address, so you can bookmark a calculation or send the link to someone.
VAT rates worth knowing
- UK: 20% standard rate, 5% reduced rate (for example domestic energy), 0% for most food, books and children's clothes.
- Most EU countries have a standard rate between 17% and 27%, plus one or more reduced rates.
- US sales tax is not a VAT and is set by states and cities, so the rate depends on where the sale happens. It is usually added at the till rather than included in shelf prices.
Common mistakes
- Subtracting the rate from a gross price instead of dividing by (1 + rate). This always understates the net price.
- Using the wrong rate for the product. Check which rate applies before you invoice.
- Rounding each line of an invoice and then the total. Small differences of a penny or two between the line sum and the total are normal; follow your accounting software or tax office rules.
- Confusing VAT-exempt with zero-rated. Both mean no VAT on the sale, but they are treated differently in a VAT return.
Frequently asked questions
How do I add 20% VAT on a normal calculator?
Multiply the net price by 1.2. To remove 20% VAT, divide the gross price by 1.2. For another rate, use 1 plus the rate as a decimal, for example 1.05 for 5%.
Is the VAT amount shown on a receipt calculated on the net or the gross price?
On the net price. That is why removing VAT needs a division: the tax is a percentage of a number that is not printed as the total.