VAT Calculator: Adding and Removing Value Added Tax
A VAT calculator converts between net (excluding VAT) and gross (including VAT) prices at any rate. Adding VAT multiplies the net price by 1 plus the rate; removing VAT divides the gross price by the same figure. Getting the direction right matters — subtracting 20% from a gross price is a common and expensive mistake.
Why you cannot just subtract the percentage
If a product sells for 120 including 20% VAT, the net price is 100 and the VAT is 20. Subtracting 20% from 120 gives 96, which is wrong by four units, because the VAT was charged on 100, not on 120. To go backwards you divide by 1.20. The larger the rate, the larger the error from doing it the wrong way.
Rates differ by country and product
- The UK charges 20% standard, 5% reduced and 0% on some essentials.
- EU standard rates typically range from 17% to 27%, with reduced rates on food, books and transport.
- Some goods are exempt rather than zero-rated — the difference affects input tax recovery for businesses.
Practical uses for businesses
Use the net figure for pricing and margin decisions and the gross figure on customer-facing prices. When you file a VAT return you generally offset the VAT you charged (output tax) against the VAT you paid on purchases (input tax) and remit the difference. Keeping net and gross clearly separated in your records makes that reconciliation straightforward.
Key takeaways — VAT Calculator
- Add VAT: net × (1 + rate). Remove VAT: gross ÷ (1 + rate).
- Never subtract the VAT percentage from a gross price.
- Confirm the correct rate for the product and country before invoicing.