To add VAT, multiply the net price by (1 + rate): a net price of 100 at 20% VAT becomes 120. To remove VAT, divide the gross price by (1 + rate): a gross price of 120 at 20% VAT is 100 net, with 20 of VAT. Those two formulas cover every VAT calculation, and the second one is the step people most often get wrong.
Adding VAT to a Net Price
VAT (Value Added Tax) is a consumption tax charged as a percentage of a price. Adding it is straightforward: VAT amount = net price × rate, and gross price = net price + VAT amount. At 20%, a net price of 100 gains 20 of VAT for a gross price of 120. At 5%, the same net price gains 5 for a gross of 105. Equivalently, multiply the net price by (1 + rate): 100 × 1.20 = 120, or 100 × 1.05 = 105. Our free VAT Calculator runs both directions instantly at any rate you enter.
Removing VAT From a Gross Price
This is where mistakes happen. You cannot simply subtract the rate, because the rate was applied to the smaller net figure, not the gross one. Subtracting 20% from 120 gives 96 — wrong. The correct move is to divide by (1 + rate): 120 ÷ 1.20 = 100 net, leaving 20 of VAT. A useful shortcut: at 20%, the VAT inside any gross price is exactly one sixth of it — 120 ÷ 6 = 20, 600 ÷ 6 = 100, 3,000 ÷ 6 = 500. At other rates, the VAT fraction of a gross price is rate ÷ (1 + rate): at 5% it is 5 ÷ 105, or about 4.76% of the gross.
Worked Examples, Side by Side
| Task | Calculation | Result |
|---|---|---|
| Add 20% VAT to 100 net | 100 × 1.20 | VAT 20, gross 120 |
| Remove 20% VAT from 120 gross | 120 ÷ 1.20 | Net 100, VAT 20 |
| Add 5% VAT to 2,000 net | 2,000 × 1.05 | VAT 100, gross 2,100 |
| Remove 19% VAT from 238 gross | 238 ÷ 1.19 | Net 200, VAT 38 |
VAT Rates Around the World
Rates vary by country and by product. The UK standard rate is 20%, with a 5% reduced rate (domestic fuel, children's car seats, some energy-saving work) and 0% on many essentials (most food, books, children's clothing). Elsewhere: Germany 19%, France 20%, Ireland 23%, Hungary 27% — one of the highest in Europe — Spain and the Netherlands 21%, Denmark and Sweden 25%, New Zealand 15%, Australia 10% (as GST), India 18% (as GST), and the UAE 5%. Reduced and zero rates differ even more than standard rates, so always confirm the rate for your specific product rather than assuming the headline figure.
VAT vs Sales Tax
VAT and sales tax are often confused, but they work differently. VAT is charged at every stage of the supply chain, with each business reclaiming the VAT it paid on its own purchases and charging VAT on its sales — so the tax falls, in the end, on the final consumer, without taxing the same value twice. Sales tax, used in the US, is charged once, to the final buyer. If you sell into the US, you need a sales tax calculation, not a VAT one; if you sell in the UK or EU, VAT is the system.
VAT for Businesses: Input vs Output
A VAT-registered business charges output VAT on its sales and pays input VAT on its purchases. Each period it pays the tax authority the difference — output minus input — or reclaims the difference if input VAT was higher. That is why keeping the net, VAT, and gross figures cleanly separated on every invoice matters: the business is only ever a collector of VAT, never its final bearer. For a quick check on any single price, the calculator above is enough; for full returns, proper accounting software is the right tool.
VAT on Digital Products and Cross-Border Sales
VAT gets more complicated when the buyer is in another country. Inside the EU, digital products sold to consumers generally carry the VAT rate of the buyer's country, not the seller's — so a seller in Germany selling an ebook to a customer in France charges French VAT. For business-to-business sales across borders, the reverse charge often applies: the buyer accounts for the VAT instead of the seller charging it, which is why cross-border B2B invoices frequently show 0% VAT with a reverse-charge note.
For a small seller, the practical lesson is simple: the add-and-remove formulas on this page still give you the right numbers, but the rate you enter depends on where your customer is and whether they are a business or a consumer. If cross-border sales become a regular part of your business, that is the point to get proper VAT advice or use software that tracks place-of-supply rules automatically — the arithmetic stays easy, but the rules do not.
Frequently Asked Questions
How do I remove VAT from a gross price?
Divide the gross price by (1 + rate as a decimal). At 20%: gross ÷ 1.20 = net, and the difference is the VAT amount. At 20%, exactly one sixth of any gross price is VAT.
What is the UK VAT rate?
The UK standard rate is 20%. A reduced rate of 5% applies to items like domestic fuel and children's car seats, and 0% applies to food, books, and children's clothing.
Why can't I just subtract 20% from a gross price?
Because the 20% was calculated on the smaller net price, not the gross one. Subtracting 20% of 120 gives 96, but the correct net is 100 — the VAT is 20, which is one sixth of the gross, not one fifth.
Is VAT the same as sales tax?
No. VAT is charged at every stage of the supply chain with businesses reclaiming the VAT they paid, while sales tax is charged once, to the final buyer. The US has sales tax, not VAT.
Try it yourself: use our free VAT Calculator to get your number in seconds — no sign-up needed.