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VAT Calculator

VAT Calculator

Easily add or remove Value Added Tax from any amount.

Understanding Value Added Tax (VAT)

Value Added Tax, or VAT, is a type of consumption tax that is placed on a product or service whenever value is added at each stage of the supply chain, from production to the point of sale. It is common in many parts of the world, particularly in the European Union. Although the end consumer ultimately pays the tax, the mechanism allows businesses to collect and pay the tax to the government at various stages.

This calculator simplifies the process of working with VAT. It allows you to either add VAT to a net price to find the gross price, or to extract the VAT from a gross price to find the original net amount. This is an essential tool for businesses for correct invoicing and for consumers to understand the final cost of goods and services.

The VAT Formulas

The calculations for adding or removing VAT are straightforward.

  • Adding VAT (to find the gross price from a net price):
    Gross Price = Net Price × (1 + VAT Rate / 100)
  • Extracting VAT (to find the net price from a gross price):
    Net Price = Gross Price / (1 + VAT Rate / 100)
    VAT Amount = Gross Price - Net Price

Frequently Asked Questions

What does VAT stand for?

VAT stands for Value Added Tax. It is a type of consumption tax that is placed on a product or service at each stage of its production or distribution, based on the 'value added' at that stage.

How is VAT different from a sales tax?

A sales tax is typically charged only at the final point of sale to the end consumer. A Value Added Tax (VAT) is collected at every stage of the supply chain. Businesses can often claim back the VAT they paid on their own purchases, so the ultimate tax burden still falls on the final consumer, but the collection mechanism is different.

How do I add VAT to a price?

To add VAT, you convert the VAT rate to a decimal and multiply it by the net price to find the tax amount. Then add this to the net price. A faster way is to multiply the net price by (1 + VAT rate as a decimal). For example, to add 20% VAT to a £100 item, you calculate £100 * 1.20 = £120.

How do I remove VAT from a gross price?

To find the original net price from a VAT-inclusive price, you divide the gross price by (1 + VAT rate as a decimal). For example, to find the net price of a £120 item that includes 20% VAT, you calculate £120 / 1.20 = £100.

What are the standard VAT rates in the UK?

In the United Kingdom, there are three rates of VAT: the standard rate (currently 20%), the reduced rate (5%, for items like home energy and children's car seats), and the zero rate (0%, for most food, books, and children's clothing). Some items are also exempt from VAT.

Which countries use a VAT system?

VAT is used by more than 160 countries around the world, including every country in the European Union, the United Kingdom, Canada (as GST), Australia, and New Zealand. The United States is a notable exception, as it primarily uses a retail sales tax system.

Can businesses reclaim VAT?

Yes. This is a key feature of the VAT system. When a VAT-registered business buys goods or services, it pays VAT on those purchases. When it sells its own goods or services, it collects VAT. The business then pays the government the difference between the VAT it has collected and the VAT it has paid. This is why it's called a 'value-added' tax—the tax is ultimately on the value added at each stage.