VAT Calculator

Enter a figure and say whether it already contains VAT. Adding VAT and removing it are two different sums, and the one most people reach for by reflex — multiplying by the rate — is only correct in one of the two directions.

Rules differ by country. This tool performs the calculation you ask for. What you are entitled to charge, and how it must be presented, is set by your contract and your local law — check both before relying on a figure here.

What this tool does

VAT is charged at each stage of a supply chain, so almost every figure you handle is either net of VAT or gross of it. A price advertised to consumers is normally gross. A price quoted between businesses is normally net. The same £1,200 therefore describes two different amounts of money depending on which convention the person who wrote it was using, and mixing them up is the most expensive habit in small-business bookkeeping.

This calculator asks the direction first, because that is the decision that determines the arithmetic. Extraction is division, not multiplication: a gross figure already contains the tax, so multiplying it by the rate charges VAT on VAT. The reverse charge is covered too — the case where a supplier charges nothing and the customer accounts for the tax themselves, which looks like a zero-rated sale on the total line and is nothing like one on paper.

How it works

  1. Say which figure you are holding

    Net means VAT has not been added yet. Gross means it is already inside the number. If you are not sure which one you have, look at who the figure was written for: quoted to a business, it is almost always net; advertised to the public, almost always gross.

  2. Adding is multiplication

    Gross = net × (1 + rate). £1,000 at 20% becomes £1,200, of which £200 is the tax. This is the direction everyone gets right.

  3. Extracting is division

    Net = gross ÷ (1 + rate), and the tax is what remains. £1,200 at 20% contains £200, not £240. The tax is derived by subtraction rather than by a second multiplication, so the three figures always reconcile exactly instead of leaving a penny stranded on the invoice.

  4. Reverse charge moves who accounts, not how much

    Under the reverse charge the supplier charges nothing and the customer accounts for the tax on their own return. The notional amount is still calculated and displayed, because the invoice has to state it alongside a reference to the mechanism — but it is never added to the amount owed.

Worked example

A photographer is paid £1,200 for a shoot and the client says the fee "includes VAT" at 20%. The bookkeeping needs the two halves of that figure.

Inputs

Amount entered
£1,200.00
Rate
20%
Figure is
Gross — tax already included

Result

Net, excluding VAT
£1,000.00
VAT
£200.00
Gross, including VAT
£1,200.00
If multiplied instead
£240.00 — wrong

Why it matters: The VAT inside £1,200 is £200, not £240. At 20% the tax is a sixth of a gross figure and a fifth of a net one, and multiplying the wrong one overstates it by 20% in the same direction on every transaction — a consistent, silent drift in the tax account rather than a one-off slip that someone notices.

Best practices

  • Label every quote and price list explicitly as excluding or including tax. A bare "£1,200" is the ambiguity that later becomes an argument about who absorbs £200.
  • Keep the net figure as the stored value and derive the gross from it. Storing gross and working backwards accumulates rounding differences down a long line-item document.
  • Show the tax on its own line with the rate beside it. A registered customer needs that line to reclaim; a single total with the tax buried inside is not much use to them.
  • Check which rate applies to what you actually sell rather than defaulting to the standard one. Reduced and zero categories exist, they are specific, and they are revised.
  • When the reverse charge applies, carry the required wording on the invoice. A reverse-charge document without the statement is the most common reason one comes back unpaid.

Common mistakes

Multiplying a tax-inclusive price by the rate

The classic. At 20% the tax inside a gross figure is one sixth of it, not one fifth. The overstated figure then flows into the return, the margin reads worse than it is, and nothing in the arithmetic ever announces the error — the totals all still add up, they are just built on the wrong split.

Quoting net to a consumer

Consumers compare the price they will actually pay. A net quote that grows by a fifth at invoice time reads as a surprise charge even though nothing improper has happened, and on small consumer jobs it is a routine cause of disputed payments.

Rounding each line independently and letting the total drift

Tax computed per line and rounded line by line will not always equal tax computed once on the document total. Both approaches are defensible; having no fixed convention is not. Pick the one your accounting system uses and stay with it, rather than typing a total that does not reconcile with its own lines.

Charging tax before registration

Thresholds and effective dates differ by country, and an invoice showing tax you were not entitled to charge normally has to be unwound with a credit note. Whether and when you must register is a question for your own tax authority — a calculator cannot answer it and this one does not try.

Frequently asked questions

How do I remove VAT from a price?

Divide by 1 plus the rate. At 20%, gross ÷ 1.2 gives the net figure and the difference is the tax — £120 contains £20. At 5% divide by 1.05, at 19% by 1.19. The shorthand worth memorising for 20% is that the tax is one sixth of the gross amount.

What is the difference between net and gross?

Net is the price before tax is added; gross is the price with it already included. Business-to-business prices are conventionally quoted net and consumer prices gross, which is exactly why the same number can mean two different things depending on who wrote it down.

What is the reverse charge?

A mechanism where the customer rather than the supplier accounts for the tax. It is widely used for cross-border business-to-business services and, in some countries, for named domestic sectors such as construction. The supplier issues an invoice with no tax charged plus a statement that the mechanism applies. Whether it covers a particular supply is a question of national rules, not arithmetic.

Do I charge VAT to a customer in another country?

That depends on where the customer belongs, whether they are in business, and what you are supplying — the place-of-supply rules are the whole subject, and they work differently for goods and for services. This calculator applies whatever rate you give it; it cannot determine which rate or which mechanism your transaction falls under.

Why does my invoice differ by a penny from my accounting software?

Almost always because one of them computes the tax on each line and sums the results, while the other computes it once on the document total. On a long invoice those two can differ by a penny or two. This tool derives the tax by subtraction so its own three figures always reconcile; matching your software is a matter of adopting its convention consistently.

Is VAT the same as GST or sales tax?

VAT and GST are broadly the same design under different names — collected at every stage, with each business reclaiming what it paid — though India layers a central and a state component on top of that idea. US sales tax is a different design entirely: charged once at the final sale, assembled from several local jurisdictions, and not reclaimable by businesses in the same way. There is a separate calculator here for each.

Turn the answer into an invoice

The result above transfers straight into the invoice generator — dates, amounts and terms already filled in. Free, no account needed.

Open the invoice generator

Sources & further reading

Related

Invoice types

Published · General information, not legal, tax or financial advice.