VAT

1. Enter your starting amount — either the net (ex-VAT) price or the gross (inc-VAT) price.
2. Select whether you want to **Add VAT** (net to gross) or **Remove VAT** (gross to net).
3. Type in the VAT rate (%) applicable to your goods or services — for example, 20% for standard UK VAT.
4. Click **Calculate** to instantly see the net amount, VAT amount, and gross total.
5. Use the displayed breakdown for your invoice, receipt, or accounting record.

Adding VAT:
  Gross = Net × (1 + r/100)
  VAT Amount = Gross − Net

Extracting VAT:
  Net = Gross ÷ (1 + r/100)
  VAT Amount = Gross − Net

• Gross — The VAT-inclusive price — the total amount a customer pays (net price plus VAT).
• Net — The VAT-exclusive price — the base price before VAT is applied.
• VAT Amount — The monetary value of VAT charged, equal to Gross minus Net.
• r — The VAT rate expressed as a percentage (e.g., 20 for 20%, 5 for 5%, 0 for zero-rated goods).

Scenario A (Adding VAT):
  Gross = £85.00 × (1 + 20/100) = £85.00 × 1.20 = £102.00
  VAT Amount = £102.00 − £85.00 = £17.00

Scenario B (Extracting VAT):
  Net = £102.00 ÷ 1.20 = £85.00
  VAT Amount = £102.00 − £85.00 = £17.00

Result: Scenario A: Net = £85.00 | VAT = £17.00 | Gross = £102.00 Scenario B: Net = £85.00 | VAT = £17.00 | Gross = £102.00

Both scenarios confirm the same set of numbers from different starting points. In Scenario A you begin with the net price (£85) and add 20% VAT to reach the gross price of £102. In Scenario B you begin with the gross price (£102) and reverse the 20% VAT to recover the net price of £85 — showing that £17 of the £102 is VAT. This demonstrates why you must divide by (1 + r/100) to extract VAT rather than simply subtracting r% from the gross figure.

Note: Results are estimates for guidance only. Actual VAT liability depends on your jurisdiction's current rules, applicable rate band, and any exemptions. Consult your tax authority or a qualified accountant for compliance purposes.

What is VAT?

Value Added Tax (VAT) is a consumption tax levied at each stage of the supply chain where value is added to a product or service. Businesses collect VAT on behalf of the government and can typically reclaim VAT they have paid on business purchases (input tax), remitting only the net amount to the tax authority.

VAT Rate Bands

Most countries with VAT operate multiple rate bands:

• Standard rate — applied to most goods and services (e.g., 20% in the UK, 19% in Germany, 23% in Ireland, 10% in Australia via GST).
• Reduced rate — applied to selected goods such as food, children's clothing, or domestic fuel (e.g., 5% in the UK).
• Zero rate (0%) — technically VAT-registered but charged at 0% (e.g., most UK food, books, and children's clothing). Unlike exempt supplies, zero-rated businesses can still reclaim input VAT.
• Exempt — certain supplies fall entirely outside the VAT system (e.g., financial services, insurance, residential property lettings in many countries).

Adding vs. Extracting VAT: Why the Math Differs

A common mistake is removing VAT by simply multiplying a gross price by the VAT rate percentage. For example, at 20% VAT, some people subtract 20% of £120 (= £24), arriving at a net of £96 — this is wrong. The correct net is £120 ÷ 1.20 = £100, so the VAT amount is £20, not £24.

The reason: when VAT is already embedded in a gross price, the VAT rate applies to the net base, not to the gross total. Dividing by (1 + r/100) correctly reverses the compounding.

VAT on Invoices

B2B invoices in VAT-registered countries must typically show:

1. The supplier's VAT registration number.
2. The net amount (VAT-exclusive).
3. The VAT rate applied.
4. The VAT amount.
5. The gross total (VAT-inclusive).

Global Equivalents

VAT goes by different names in different countries: GST (Goods and Services Tax) in Australia, Canada, India, and New Zealand; IVA in Spain, Mexico, and Italy; TVA in France. The underlying arithmetic is identical regardless of name.

• **Subtracting a percentage of the gross to remove VAT.** Always divide the gross by (1 + r/100) — never multiply the gross by the rate and subtract. At 20%, dividing £120 by 1.20 gives the correct net of £100; subtracting 20% of £120 gives a wrong answer of £96.
• **Using the wrong rate band.** Ensure you apply the correct rate for your specific product or service category. Reduced, zero, and standard rates differ significantly.
• **Confusing zero-rated with exempt.** Zero-rated goods are still within the VAT system; exempt supplies are not. Businesses selling only exempt goods cannot register for VAT or reclaim input tax.
• **Rounding errors on multi-line invoices.** Rounding each line separately before summing can produce a different total than summing first and rounding once. Follow your tax authority's rounding convention.
• **Applying VAT to the total including shipping without checking rules.** In some jurisdictions, postage and delivery charges have different VAT treatment depending on the nature of the supply.

• VAT rates on different goods and services — HM Revenue & Customs (HMRC), UK Government
• How VAT works — HM Revenue & Customs (HMRC), UK Government
• VAT – European Commission Taxation and Customs Union — European Commission
• GST/HST for businesses — Canada Revenue Agency

Only sources that have been reviewed are shown. Unverified citations are never published.