How to calculate VAT: add it or remove it the right way
Adding VAT is easy. Taking it off a gross price is where almost everyone goes wrong. Here are the exact formulas and examples.
The two formulas
- Net to gross: gross = net × (1 + rate). At 20%: £100 × 1.20 = £120.
- Gross to net: net = gross ÷ (1 + rate). At 20%: £120 ÷ 1.20 = £100.
The VAT amount is the difference: 120 − 100 = 20. If you only have the gross price, the VAT inside it is gross × rate ÷ (1 + rate). At 20%, that is simply one sixth of the gross price.
The classic mistake: taking 20% off the gross price
Many people do £120 − 20% = £96. That is wrong: VAT was charged on the net price (£100), not on the gross price. Always divide by 1.20 instead of subtracting 20%.
| Gross price | Rate | Correct net price | VAT |
|---|---|---|---|
| 120.00 | 20% | 100.00 | 20.00 |
| 121.00 | 21% | 100.00 | 21.00 |
| 50.00 | 5% | 47.62 | 2.38 |
| 1,000.00 | 19% | 840.34 | 159.66 |
Standard and reduced rates
| Country | Standard | Reduced |
|---|---|---|
| United Kingdom | 20% | 5% (home energy, child car seats), 0% (most food, books, children's clothes) |
| Belgium | 21% | 12%, 6%, 0% |
| France | 20% | 10%, 5.5%, 2.1% |
| Germany | 19% | 7% |
| Switzerland | 8.1% | 3.8% (accommodation), 2.6% |
Which rate applies depends on the product: check with your tax authority (HMRC in the UK) if in doubt.
Do it in two seconds
The VAT calculator works both ways, with these rates or your own. For a full invoice with a discount and several lines, use the invoice calculator. If you are VAT-registered, VAT payable gives the balance due (output VAT − input VAT).
Frequently asked questions
How do I remove VAT from a price?
Divide the gross price by 1 + the rate. At 20%: gross ÷ 1.20. Do not just subtract 20% from the gross price.
How much VAT is in £120 at 20%?
£20. The net price is £100. At 20%, the VAT is always one sixth of the gross price.
What is the standard VAT rate in the UK?
20%. The reduced rate is 5% and many items such as most food and children's clothes are zero-rated.
This information is for guidance only and does not replace professional advice.