VAT Calculator: How to Add and Remove VAT
To add VAT, multiply the net price by (1 + rate); to remove it, divide the gross price by (1 + rate). The second one is where most mistakes happen. Below are both, with worked examples; the VAT calculator does either direction.
VAT Basics and Rates
Value added tax is an indirect tax charged on goods and services at each stage of production and distribution. Unlike a sales tax, which is applied only at the final sale, VAT is collected incrementally through the supply chain, with businesses reclaiming the VAT they paid on inputs, so the end consumer bears the full tax.
Rates vary by country and product. The UK standard rate is 20%, with a 5% reduced rate on items such as home energy and a zero rate on most food and children's clothes. EU standard rates run from 17% (Luxembourg) to 27% (Hungary), and the EU VAT Directive sets a 15% minimum standard rate. Rates change from time to time, so check the tax authority's current table before you invoice.
For cross-border sales the rate can depend on where the customer is. In the EU, once a business's sales of goods and digital services to consumers in other member states exceed €10,000 a year (excluding VAT), it generally charges the customer's country rate and can report all of it through the One-Stop Shop (OSS) in its home state.
How to Add VAT to a Net Price
Gross price = net price × (1 + VAT rate as a decimal). At 20%: gross = net × 1.20.
Example: you're selling consulting services for £500 excluding VAT. At 20%, £500 × 1.20 = £600. The VAT is £100 (£600 − £500), exactly 20% of the net price.
When an invoice mixes items with different VAT rates, apply each rate to its own lines. A UK supermarket receipt, for instance, can combine zero-rated basic groceries with standard-rated items such as alcohol.
How to Remove VAT from a Gross Price
Removing VAT is not the same as subtracting the percentage. Many people assume that removing 20% VAT means taking 20% off the gross price, which gives the wrong answer.
Net price = gross price ÷ (1 + VAT rate as a decimal). At 20%, divide by 1.20. A product priced at £240 including VAT has a net price of £240 ÷ 1.20 = £200, and the VAT is £40.
If instead you calculate £240 − (£240 × 0.20) = £192, you understate the net price by £8 and overstate the VAT (£48 instead of £40). The error is always 1/30 of the gross amount at 20% VAT, and it grows proportionally on large invoices. Always divide.
Using a Calculator
The VAT calculator takes a price and the VAT rate and either adds VAT to a net price (returning the gross price or the VAT amount) or removes it from a gross price (returning the net price or the VAT it contained). It is not tied to a currency, so the arithmetic is the same for pounds, euros or anything else. For US-style sales tax on a single combined rate, the Sales Tax calculator takes the purchase amount and rate.
Common VAT Scenarios
A freelance graphic designer invoices £800 for logo design, £1,200 for website graphics and £400 for business cards. At 20% VAT, the lines become £960, £1,440 and £480, totaling £2,880 including VAT (£2,400 net plus £480 VAT).
Cross-border sales within the EU follow the destination rule described above. An EU online shop over the €10,000 threshold selling a €100 (net) product to a consumer in Germany charges German VAT of 19% (€119 total); the same product sold to a consumer in France carries 20% (€120 total).
Mixed supplies, where goods and services with different VAT treatment are sold together, need each component's VAT worked out separately. Keep the split on the invoice, since that's what a tax inspector will check.
This page explains the arithmetic; VAT registration, exemptions and reclaim rules depend on your country and situation and are not covered here. Check with your tax authority or an accountant.
Related guide: how to calculate percentages.