ToolPikaHow it works
VAT is a percentage of the price before tax. Adding it and taking it out again therefore use different operations:
| Calculation | Formula | Example at 20% |
|---|---|---|
| Add VAT | total = net × (1 + rate ÷ 100) | £50 × 1.2 = £60 |
| Remove VAT | net = total ÷ (1 + rate ÷ 100) | £60 ÷ 1.2 = £50 |
| VAT only, from a gross price | VAT = total − net | £60 − £50 = £10 |
The VAT is rounded to the nearest penny, half a penny upwards, and the remaining figure is worked out from it, so the three amounts on screen always add up.
UK VAT rates
| Rate | What it applies to (examples) |
|---|---|
| 20% standard | Most goods and services: electronics, clothes for adults, restaurant meals, petrol |
| 5% reduced | Home energy, children’s car seats, some energy-saving installations |
| 0% zero rate | Most food in shops, books and newspapers, children’s clothes |
Some things are exempt, such as most insurance and postage stamps, which is not the same as the 0% rate. When in doubt, HMRC’s guidance on VAT rates lists each item.
Examples
- A quote without VAT. A web designer quotes £1,250 + VAT. With VAT the invoice is £1,500, of which £250 is VAT.
- A receipt with VAT included. A £59.99 purchase includes £10.00 of VAT; the price without VAT is £49.99.
- Home energy at 5%. A £84 energy bill including VAT is £80 without VAT and £4 of VAT.
VAT rates in other countries
Standard rates in some countries, for typing in the rate field: Ireland 23%, Germany 19%, France 20%, Spain 21%, Italy 22%, Netherlands 21%. Australia and New Zealand charge GST at 10% and 15%. Rates change from time to time, so check the current one with the tax authority before relying on it for an invoice.