Start by asking which price you have
Every VAT calculation starts with one question: does this number already include VAT? A net price (VAT exclusive) is the price before tax. A gross price (VAT inclusive) is what the buyer pays. Get this wrong and the rest of the sum is wrong too, however careful you are.
Shop prices for consumers in the UK and EU almost always include VAT. Supplier quotes, wholesale price lists and freelance invoices often show the net figure first and add VAT at the bottom. If a quote says "plus VAT" or "ex VAT", it's net.
Adding VAT to a net price
Turn the rate into a decimal and multiply. At 20%, VAT on £400 is £400 x 0.20 = £80, and the gross price is £480. You can do it in one step with £400 x 1.20.
This works at any rate. At Germany's 19% standard rate, €400 net becomes €476. At a 5% reduced rate, £400 becomes £420.
Formula notes
VAT = net x rateGross = net x (1 + rate)
Removing VAT from a gross price
To get back to the net price, divide by 1 plus the rate. £480 / 1.20 = £400, and the VAT is the difference, £80. If you only need the VAT, multiply the gross by the rate over 100 plus the rate. At 20% that's one sixth, so £480 / 6 = £80.
Handy fractions for common rates: one sixth at 20%, 19/119 at 19%, 23/123 at 23% and 1/21 at 5%. With a phone calculator, dividing by 1.20 or 1.19 is quicker than remembering any of them.
Formula notes
Net = gross / (1 + rate)VAT inside a gross price = gross x rate / (1 + rate)
The 20% mistake and why it happens
The most common VAT error is taking 20% off a gross price. On £480 that gives £384 net and £96 VAT, which overstates the tax by £16. The reason is simple: the 20% was charged on £400, so it has to come back out of £480 as a smaller share.
The same trap catches people reading discounts and price rises. If a price goes up 20% and then comes down 20%, you don't get back where you started. Percentages always depend on the base they were taken from.
Discounts, delivery and mixed baskets
Apply a plain discount before VAT. A £500 net order with 10% off is £450 net, and 20% VAT on that is £90, for £540 in total. In the UK, when delivery is part of the sale, the delivery charge follows the VAT rate of the goods. An optional delivery service sold separately is standard-rated.
A basket with different rates needs one calculation per rate. Children's car seats at 5% and adult clothing at 20% can't share a single sum. Work out each group, then add the net, VAT and gross subtotals. Our VAT calculator handles one rate per run and shows every step, which makes this easy to check.
Check your answer in five seconds
Every VAT sum can be tested. After adding VAT, confirm that net plus VAT equals gross. After removing it, multiply your net figure by 1 plus the rate and see whether you land back on the gross. If you're a penny out, it's rounding. If you're further out, check the rate and whether you started from the right price.
For anything that goes on a VAT return, the rate and treatment matter as much as the maths. Check the current rate with your tax authority, because governments do change them and many goods sit in reduced or zero-rate bands.
Frequently asked questions
What's the quickest way to find VAT at 20% in a total?
Divide the total by six. It works because 20% VAT is one sixth of a VAT-inclusive price. A £72 total holds £12 of VAT.
Do I calculate VAT on delivery charges?
Usually yes. Under UK rules, delivery that's part of the sale takes the same VAT rate as the goods, and a separate optional delivery service is standard-rated. Other countries set their own rules.
How do I calculate VAT on a basket with different rates?
Split the items by rate, work out net, VAT and gross for each group, then add the subtotals together. One rate per calculation keeps the numbers right.
Should I round VAT per item or on the total?
Either can be acceptable, but you should follow one method consistently. UK guidance in VAT Notice 700 explains the options for invoices.
Is VAT the same as sales tax?
Both are taxes on what people buy. VAT is charged at each stage of the supply chain and shown in the price, while US sales tax is usually added once at the till.
References
These sources support the method or guidance used for VAT Calculator. Verify time-sensitive rules at the source.
Try the calculator
Open VAT Calculator, enter your scenario, and compare its supporting rows with this guide's method and checks.