How this VAT calculator works
Adding VAT: enter a net (VAT-exclusive) figure and the calculator multiplies it by the VAT rate to find the VAT, then adds it on to give the gross total. At 20%, £100 plus VAT is £120.
Removing VAT: enter a gross (VAT-inclusive) total and the calculator works backwards to find the original net amount and the VAT contained within it. A common mistake is to take 20% off the gross figure, which gives the wrong answer. Instead you divide by 1.20, because the gross is 120% of the net. So £120 including VAT is £100 net, with £20 of VAT.
Use the buttons for the UK's standard rate of 20%, the reduced rate of 5% (used for things like domestic energy and children's car seats), or the zero rate, or type any rate you need.
VAT Calculator Explantion
This guide explains how the calculator above works, the simple formulas behind it, and the one common mistake to avoid.
What is VAT?
VAT, or Value Added Tax, is a consumption tax charged on most goods and services in the UK. Businesses that are VAT-registered add it to their prices, collect it from customers, and pass it on to HMRC.
Because it is built into the price you pay, it is easy to lose track of how much of a given figure is the actual cost and how much is the tax.
There are three main UK VAT rates.
The standard rate is 20% and applies to most goods and services.
The reduced rate is 5%, used for things such as domestic gas and electricity, children's car seats and some home energy-saving materials.
The zero rate is 0%, which covers items like most food, children's clothing and books. The calculator lets you switch between these with one tap, or type in any rate you need.
Adding VAT to a net figure
Adding VAT is the more straightforward direction. You start with a net amount (the price before tax) and work out the tax to add on top.
The formula is simply the net amount multiplied by the rate.
At the standard rate, you multiply by 20% (or 0.20) to get the VAT, then add it to the net figure to get the gross total.
For example, a £100 net price has £20 of VAT added, giving a £120 gross total.
A quick shortcut for the standard rate is to multiply the net figure by 1.20, which gives you the gross total in one step.
Removing VAT from a gross figure
This is where people go wrong.
If you have a total that already includes VAT and want to find the original price, it is tempting to simply take 20% off the total. That gives the wrong answer.
Here is why. The gross figure is not 100% of the price plus 20%; it is already 120% of the net price.
To get back to the net amount, you have to divide by 1.20, not subtract 20%.
Take a £120 gross total.
The correct method is £120 ÷ 1.20 = £100 net, leaving £20 of VAT. The incorrect method, taking 20% off, would give £120 − £24 = £96, which is wrong.
The difference exists because 20% of the larger gross figure is more than 20% of the smaller net figure.
For the reduced rate you divide by 1.05 instead, and in general you divide by one plus the rate expressed as a decimal.
The calculator handles this automatically.
Switch it to "Remove VAT", enter the VAT-inclusive total, and it shows you the net amount and the exact VAT contained within it.
Why both directions are useful
Adding VAT is what you do when setting prices or quoting a customer: you know your net price and need to show the final amount including tax.
Removing VAT is what you do when reconciling receipts, completing a VAT return, or working out the true cost of something you bought, where you only have the total paid and need to split out the tax.
Anyone who runs a business, does bookkeeping, or simply wants to understand a receipt will find themselves needing both.
A note on the figures
The calculator rounds to the nearest penny for display, which is the normal convention.
In practice, HMRC allows VAT to be rounded in a few different ways on invoices, and businesses with many line items may calculate VAT per line rather than on the total, so a penny of rounding difference is nothing to worry about.
The rate is fully adjustable, so although 20% has been the UK standard rate since 2011, you can set it to any value if the rules change or if you are working with a different rate.
How to use the calculator
Choose "Add VAT" or "Remove VAT", enter your amount, and set the rate using the preset buttons or by typing your own.
The calculator instantly shows the net amount, the VAT, and the gross total, with the figure you are solving for highlighted.
Change any input and the results update straight away.
This article is for general information only and does not constitute financial or tax advice. For specific VAT questions, consult HMRC or a qualified accountant.