VAT Inclusive/Exclusive Calculator

VAT (Value Added Tax) is a consumption tax added to most goods and services. The standard UK VAT rate is 20%. Some goods have reduced rates (5% for domestic fuel and energy) or zero rates (most food, children’s clothing, books).

Adding VAT to a price: VAT amount = Net price × (VAT rate / 100) Gross price = Net price × (1 + VAT rate / 100)

Example: Net price £100 + 20% VAT: VAT = £100 × 0.20 = £20 Gross price = £120

Extracting VAT from a VAT-inclusive price (reverse VAT): Net price = Gross price / (1 + VAT rate / 100) VAT amount = Gross price − Net price

Example: VAT-inclusive price of £240 at 20% VAT: Net price = £240 / 1.20 = £200 VAT = £240 − £200 = £40

This is where nearly everyone slips. Taking 20% of the VAT-inclusive £240 gives £48, which is too much: £48 is 20% of £240, but the VAT was 20% of the net £200. Divide by 1.20, do not multiply by 0.20. The shortcut worth memorising for a 20% rate is that VAT is exactly one sixth of the gross price, so £240 ÷ 6 = £40 in your head.

Common VAT rates in the UK:

• Standard rate: 20% (most goods and services)
• Reduced rate: 5% (domestic energy, children’s car seats, some renovations)
• Zero rate: 0% (most food, books, newspapers, children’s clothes)
• Exempt: no VAT charged and businesses cannot reclaim (financial services, postal services, insurance)

Worked example, a restaurant bill: Food and drinks (VAT-inclusive) total: £85.60 At 20% VAT: Net amount = £85.60 / 1.20 = £71.33 VAT = £85.60 − £71.33 = £14.27

VAT registration threshold: UK businesses must register for VAT once turnover exceeds £90,000. Below that, registering is optional, and it is often worth doing for a business selling to other businesses, because you can then reclaim the VAT on your own purchases while your customers reclaim yours.

The same tax under other names. GST (Goods and Services Tax) in Australia, Canada, India, New Zealand and Singapore works the same way, as does IVA in Spain, Italy and most of Latin America. The arithmetic on this page does not change with the name, only the rate: 10% in Australia, 5% federal GST in Canada, 15% in New Zealand, 9% in Singapore, and 5%, 12%, 18% or 28% in India depending on the goods. Put your local rate in the box and the divide-by-(1 + rate) rule holds everywhere.

One quirk worth knowing if you are converting a price list: VAT is calculated on the price after any discount, not before. A £100 item at 20% VAT with a 10% discount is £90 net and £108 gross, not £120 less £12. Getting that backwards is the second most common mistake after multiplying the gross price by the rate.