How to Calculate VAT: Add, Remove and Reverse VAT (With Examples)

VAT (value added tax) is a consumption tax added to most goods and services. Whether you are pricing a product, checking an invoice, or filing a return, you need to move between two numbers: the net price (before tax) and the gross price (after tax). Adding VAT goes from net to gross; removing or reversing VAT goes from gross back to net. This guide gives you both formulas, step by step worked examples, a reference chart of UK rates, and the mistakes that cause the most costly errors.

The reason VAT trips people up is that the two directions are not mirror images of each other. Adding VAT is simple multiplication, but reversing it is a division, because the tax was worked out on the smaller net figure and you are trying to recover that figure from the larger total. Get the direction wrong and every downstream number, from a quoted price to a reclaim on a return, is off. The sections below walk through each direction slowly, then give you a chart and a set of checks so you can trust your result.

What is the VAT formula?

The VAT formula depends on which direction you are calculating. To add VAT to a net price, the formula is VAT = net price x (rate / 100) and then gross = net + VAT. To remove VAT from a gross price, the formula is net = gross / (1 + rate / 100) and then VAT = gross - net.

The rate is a percentage, so you convert it to a decimal by dividing by 100. A 20 percent rate becomes 0.20. Adding VAT is straightforward multiplication. Removing VAT is where people slip up: you cannot simply take 20 percent off a gross price, because the 20 percent was calculated on the smaller net figure, not the larger gross one. That is why removing VAT uses division by 1 plus the rate, not subtraction of the rate.

How do you add VAT to a price?

To add VAT, multiply the net price by the rate divided by 100 to get the VAT amount, then add that VAT to the net price to get the gross price. Here is the full sequence for a net price of 100 at the standard UK rate of 20 percent.

1. Write down the net price, the amount before tax. Here it is 100.
2. Convert the rate to a decimal: 20 percent becomes 20 / 100 = 0.20.
3. Multiply the net price by the decimal rate to get the VAT: 100 x 0.20 = 20.
4. Add the VAT to the net price to get the gross price: 100 + 20 = 120.

The VAT is 20 and the gross (VAT-inclusive) price is 120. A useful shortcut is to multiply the net price by 1.20 directly, since 1 + 0.20 = 1.20, which jumps straight to the gross price of 120. For a 5 percent reduced rate you would multiply by 1.05 instead. To skip the arithmetic entirely, our VAT calculator adds VAT for any rate in one step, and if percentages are not your strong point, our guide on how to calculate percentage breaks down the underlying math.

How do you remove VAT from a price?

To remove VAT from a gross price, divide the gross price by 1 plus the rate as a decimal to get the net price, then subtract the net from the gross to get the VAT amount. This is often called reverse VAT or a VAT-inclusive calculation. Here is the sequence for a gross price of 120 at 20 percent.

1. Write down the gross price, the VAT-inclusive amount. Here it is 120.
2. Add 1 to the decimal rate: 1 + 0.20 = 1.20.
3. Divide the gross price by that figure to get the net price: 120 / 1.20 = 100.
4. Subtract the net from the gross to get the VAT: 120 - 100 = 20.

The net price is 100 and the VAT contained in that 120 is 20. This is the calculation to reach for when you have a receipt showing only the total and you need to know how much of it was tax, which is exactly what businesses do when reclaiming VAT on purchases. The common trap, covered below, is to take 20 percent off 120 and get 24, which is wrong. The correct VAT is 20.

The same division works at any rate, you just change the divisor. Reversing a 105 gross price at the 5 percent reduced rate means dividing by 1.05: 105 / 1.05 = 100 net, and 105 - 100 = 5 VAT. Reversing a 230 gross at 15 percent means dividing by 1.15: 230 / 1.15 = 200 net, and 230 - 200 = 30 VAT. The pattern never changes, so once you can reverse one price you can reverse any price. If the total already excludes VAT (a net quote), there is nothing to reverse, you simply add VAT to it as shown above.

What are the UK VAT rates?

The UK has three VAT rates: a standard rate of 20 percent, a reduced rate of 5 percent, and a zero rate of 0 percent. According to gov.uk, the standard 20 percent rate applies to most goods and services, the 5 percent reduced rate covers items like domestic energy and children's car seats, and the zero rate covers most food and children's clothing. Some items, such as postage stamps and certain financial services, are exempt from VAT entirely, which is different from being zero-rated.

Zero-rated and exempt both mean no VAT is charged to the customer, but they are not the same for a business: a zero-rated seller can still reclaim VAT on its own purchases, while an exempt seller usually cannot. If you sell across borders, remember that VAT rates differ by country, so always confirm the rate that applies to the specific sale before you calculate. VAT works much like a US sales tax added on top of a net price, so if you price for both markets our sales tax calculator applies the same net-to-gross logic.

Which rate you charge is not a choice, it is fixed by what you sell, so a mixed basket can carry more than one rate on the same invoice. A cafe selling hot food at 20 percent alongside cold takeaway items that are zero-rated has to calculate each line at its own rate and only then total the VAT. That is also why you should keep net and gross columns separate on every line rather than applying a single blanket rate to the whole bill. When a business passes the VAT registration threshold it must register, charge VAT on its taxable sales, and file returns, and only registered businesses can reclaim the VAT they pay on purchases.

Quick VAT reference chart

The table below shows common net prices with VAT added at both the 20 percent standard rate and the 5 percent reduced rate, so you can sense-check your own figures at a glance. The gross column is what the customer actually pays.

What are the most common VAT mistakes?

The most common VAT mistake is removing VAT by subtracting the rate percentage from the gross price instead of dividing by 1 plus the rate. That single error overstates the VAT and understates the net. Check yourself against this list before you trust a figure.

• Taking the rate off the gross to reverse VAT. Subtracting 20 percent from a 120 gross gives 24, but the real VAT is 20. Always divide the gross by 1.20 to find the net first.
• Using the wrong rate. Applying 20 percent to a reduced-rate or zero-rated item overcharges the customer. Confirm the item's rate on gov.uk before calculating.
• Confusing exempt with zero-rated. Both mean no VAT to the customer, but they are treated differently on a return and affect whether you can reclaim input VAT.
• Rounding too early. Round only the final VAT figure, not each intermediate step, or small errors compound across an invoice with many lines.
• Mixing net and gross totals. Adding a net price to a gross price on the same invoice line produces a total that means nothing. Keep the two consistent.
• Assuming every country uses 20 percent. VAT rates vary widely by country, so a cross-border sale may use a completely different rate.

Good to know: net, gross and the VAT fraction

A handy trick for the standard 20 percent rate is the VAT fraction of one sixth. Because VAT of 20 percent sits on top of the net, the VAT portion of a gross price is exactly 1/6 of the gross. So for a 120 gross price, 120 / 6 = 20, which matches the reverse calculation exactly. This shortcut only works at 20 percent; at other rates you must use the full division method.

It also helps to keep the vocabulary straight. Net is the price before VAT, gross is the price after VAT, and VAT is the difference. An invoice usually shows all three so both buyer and seller can see the tax clearly. If you work with prices day to day, the same net-to-gross thinking underpins related ideas like how to calculate markup and how to calculate profit margin, where a base figure is scaled up by a percentage in much the same way.

Calculate VAT instantly

Rather than run the arithmetic by hand every time, enter a price and a rate below to add or remove VAT in one step. The calculator handles both directions, so you can go from a net price to a gross price or reverse a VAT-inclusive total back to its net and VAT parts.

VAT comes down to two moves. To add it, multiply the net price by the rate and add it on, or just multiply by 1 plus the rate to jump straight to the gross. To remove it, divide the gross by 1 plus the rate to find the net, then subtract to find the VAT. Use the right rate, keep net and gross consistent, and round only at the end, and your VAT will be correct every time.