How to Add or Remove VAT From a Price (UK, EU and Sales Tax)
Work out net, tax and gross prices. Learn the formula to add VAT, remove VAT from a total and the common UK VAT rates.
Prices come in two forms: net (before tax) and gross (with tax). Mixing them up is one of the most common mistakes in invoices and shop pricing. This guide shows how to add VAT to a net price, how to take VAT out of a gross price, and how to check your work with the free VAT Calculator.
Quick answer
Choose whether your price already includes tax, enter the tax rate (or tap a preset such as UK 20 percent), and read the net amount, the tax and the total.
Key terms
- Net price: the price before tax.
- VAT or sales tax: the tax added, as a percentage of the net price.
- Gross price: net plus tax, the amount the customer pays.
Adding VAT to a net price
Gross = net x (1 + rate / 100)
For 100 net at 20 percent VAT: 100 x 1.20 = 120. The VAT is 20.
Removing VAT from a gross price
Net = gross / (1 + rate / 100)
For a gross price of 120 at 20 percent VAT: 120 / 1.20 = 100. The VAT is 20.
A very common mistake is to subtract 20 percent of the gross price (24), which gives 96 and is wrong. The tax was calculated on the net, so you must divide, not subtract.
UK VAT rates
In the UK the common VAT rates are:
- 20 percent, the standard rate for most goods and services.
- 5 percent, the reduced rate for some items such as home energy.
- 0 percent, the zero rate for certain items such as most food and children's clothes.
Rates and rules can change, so confirm with official guidance for your case.
Sales tax in the US
US sales tax is different. It varies by state, county and city, it is usually added at the till rather than shown in the price, and some items are exempt. Enter the combined local rate to estimate the total.
How to use the calculator, step by step
- Open the VAT Calculator.
- Enter the price.
- Choose price includes tax or price excludes tax.
- Enter the rate or tap a preset.
- Read the net amount, the tax and the total.
When this is useful
- Invoices. Showing net, VAT and gross clearly. Create one with the Invoice Maker.
- Pricing products. Deciding what to charge to include tax.
- Checking receipts. Seeing how much VAT you paid on a purchase.
- Comparing prices. Making sure two quotes are on the same basis.
Related tools
- GST Calculator for countries using GST, including CGST and SGST split for India.
- Discount Calculator for sale prices.
- Margin and Markup Calculator for setting prices that leave a profit.
Worked examples for invoices
Example 1: add VAT to a net price
A designer charges 40,000 net for a project with 15 percent VAT. VAT = 40,000 x 0.15 = 6,000. The gross price is 46,000.
Example 2: remove VAT from a gross price
A receipt shows a total of 11,500 including 15 percent VAT. Net = 11,500 / 1.15 = 10,000. VAT = 1,500.
Example 3: a UK shop price
A product is advertised at 59.99 including 20 percent VAT. Net = 59.99 / 1.20 = 49.99. VAT = 10.00.
Always round at the end of the calculation, and show amounts to two decimals.
Reading a receipt correctly
A VAT receipt normally shows the net amount, the VAT amount and the gross total, often with the seller's VAT registration number. If a receipt only shows a total, you can still work out the VAT using the method above if you know the rate.
Common situations
- Freelancers and small companies must show VAT separately on invoices when registered.
- Buyers who can reclaim VAT need receipts that show the amount.
- Exporters may sell at a zero rate.
- Consumers simply pay the gross price.
The rules differ between countries, so confirm the correct rate, threshold and registration requirement with your tax authority or adviser.
Avoiding mistakes
- Do not mix net and gross within one invoice.
- State the rate on the document.
- Keep the rounding consistent. Rounding each line versus rounding the total can differ by a few pence.
- Update the rate when the law changes.
- Double-check with a calculator before you send a bill.
Quick checklist
- Know whether the price is net or gross.
- Use the right rate for the product.
- Divide, do not subtract, to remove tax.
- Show net, VAT and total on invoices.
A worked example: a UK freelancer quoting a client
A graphic designer in the UK charges a day rate of 250 net. The client is VAT registered and can reclaim VAT, so the designer quotes "250 plus VAT". For a three-day job the invoice shows a net of 750, VAT at 20 percent of 150 and a total of 900. Later, a private customer asks for a price "all in". The designer calculates 250 x 1.20 = 300 per day and quotes 900 for three days including VAT.
The same work gets two correct presentations depending on the buyer. Misunderstandings happen when one side thinks the price includes VAT and the other does not, which is why the invoice should state net, VAT and total clearly.
Checklist for correct invoices
- Show the VAT rate and the VAT amount.
- Include your VAT number where required.
- Round consistently to two decimals.
- Keep copies for the required period.
Frequently asked questions
How do I take 20 percent VAT off a price? Divide the gross price by 1.20. Do not subtract 20 percent.
What is the difference between net and gross? Net is before tax; gross includes tax.
What are the UK VAT rates? Commonly 20 percent standard, 5 percent reduced and 0 percent zero rate.
Does it work for US sales tax? Yes, enter the combined rate that applies.
Is it free? Yes.
Is VAT charged on VAT? No. VAT is charged on the net price once.
How do I find VAT included in a total? Divide the gross by (1 + rate) to get the net, then subtract it from the gross.
Do all countries use VAT? No. Some use GST or a sales tax instead.
Do I charge VAT on exports? Many countries apply a zero rate to exports. Check your own rules.
Does a small business have to charge VAT? Usually only above a registration threshold. Ask your tax authority.
Next step
Open the VAT Calculator below and check your next invoice or price in seconds.