How to add or remove VAT from a price without the common mistake
To add VAT to a net price, multiply it by 1 plus the rate. To remove VAT from a gross price, divide it by 1 plus the rate. The same method works for sales tax and GST at any rate, as long as you use the right rate. The VAT calculator works in both directions and shows the net, the tax and the gross together, with the working.
VAT calculatorAdd or remove VAT from a priceOpenAdding VAT to a net price
Net is the price before tax. At a 20% rate the multiplier is 1.20, so gross = net × 1.20. A net price of 100 gives a gross of 120, and the tax is the difference, 20.
Two more examples: a net price of 45 at 20% gives 45 × 1.20 = 54, with tax of 9. A net price of 200 at 15% gives 200 × 1.15 = 230, with tax of 30. The tax is always the gross minus the net, which is a quick way to check a figure.
Removing VAT from a gross price
Gross is the price including tax. To find the net, divide by the multiplier, not by the rate.
Take 120 including 20% VAT. Divide by 1.20 and the net is 100. The tax is 120 − 100 = 20.
Other examples: 30 including 20% gives 30 ÷ 1.20 = 25, with tax of 5. 84 including 5% gives 84 ÷ 1.05 = 80, with tax of 4.
The common mistake: subtracting the percentage
Many people take 20% off 120 and get 96. That is wrong, and the reason is worth understanding. The 20% was a percentage of the net price, 100. It was never a percentage of the gross 120. The tax is 20 out of 120, which is 16.67% of the gross, not 20%.
So gross × (1 − 0.20) gives 96, which is 4 short of the true net. The answer looks close enough to pass a quick glance, which is why the mistake spreads. The check is simple: take the net you calculated and add the tax back. If you get 120, you are right. If you get 96, you have taken the rate from the gross.
The same confusion appears in reverse. If you add 20% to a net price and then take 20% off the result, you do not get back to the start. Net 100 plus 20% is 120, and 120 less 20% is 96. The rate is applied to a different base each time, so the two changes do not cancel. Keep the directions separate: multiply by 1 plus the rate to add tax, and divide by 1 plus the rate to remove it.
Net and gross pricing
Prices come in two forms. Net, or VAT-exclusive, prices show the amount before tax, and the tax is added at the end. Business quotes and invoices are often written this way, because a VAT-registered buyer may be able to reclaim the tax. Gross, or VAT-inclusive, prices show what the buyer pays in total. In many countries, shops must show consumer prices including tax, so a sticker price usually includes it.
Check which form a supplier is using before you compare two prices. A net price that looks cheaper can end up dearer than a gross price once the tax is added.
For the UK standard rate of 20%, which applies at the time of writing, the multiplier is 1.20 and the arithmetic above applies directly. Reduced and zero rates exist for some goods and services, and rates can change, so check the current rate for the item and country before you rely on it.
Rounding per line or on the total
Tax on an invoice is often calculated for each line and then added up, which can differ from taking the tax on the total. Here is a small example with three items at a net of 0.33 each, at 20%:
- Per line: 0.33 × 0.20 = 0.066, rounded to 0.07 each. Three lines give 0.21 of tax.
- On the total: net 0.99 × 0.20 = 0.198, rounded to 0.20.
The gap is one cent. On a large invoice it adds up, so use the method your accounting software or the invoice rules require. Those rules come from the tax authority or your accountant, not from a calculator. If you issue invoices for a business, check the rules rather than assume.
Discounts and VAT
If a price is discounted and VAT is involved, the order does not change the result, as long as you do not round in between. A gross price of 120 with 10% off is 108 gross, which is 90 net at 20%. Taking 10% off the net first gives 100 × 0.90 = 90 net. Either way the answer is the same. Differences in a receipt usually come from rounding at a different step.
For the discount itself, the discount calculator works through a sale price. The percentage calculator shows the share a figure represents. Tax of 20 on a gross of 120 is 16.67% of the gross, which is useful when a receipt shows the tax as a share rather than a rate.
Quick answers
What is 20% VAT on 100? The tax is 20, and the gross is 120.
Why is my net price 4 too low? You probably took 20% off the gross instead of dividing it by 1.20.
Is GST the same calculation? The arithmetic is the same. Use the GST rate that applies to the item.
