Calculating VAT

Want to work out VAT for yourself? Well, I'll try to explain how it works. First I'll explain Gross and Nett, and then we'll have a look at the maths...

Gross: the Gross price is the price including VAT. Also called "inc VAT".

Nett: the Nett price is the price excluding VAT. Also called "ex VAT" or "Net".

Work out your ratio

These calculations work by multiplying or dividing by a ratio (also called the VAT fraction). The first step is to figure out your ratio - so what is it? Luckily it's very easy to work out. Take your VAT rate, divide it by 100 and then add 1. For example a rate of 20% gives you a ratio of 1.20 (that's 20/100 = 0.2 + 1 = 1.2)

That makes it sound complicated so here's a rule of thumb: just put "1." in front of the VAT rate, so 20% becomes 1.20, 17.5% becomes 1.175, and 5% becomes 1.05

If you are in the UK and using a VAT rate of 20% the ratio is 1.20. If you are in Germany and your rate is 23% then the ratio is 1.23.

Adding VAT

Adding VAT to an amount is very easy. All you need to do is multiply your Nett amount by your ratio.

For example, if you are selling a chair for £150 Nett and need to add 20% VAT to get the Gross price including VAT, you use:

150 x 1.20 = 180

So the Gross amount including VAT is £180.

Removing VAT

Taking VAT off an amount is just as easy (providing you have a calculator, I'm terrible at division). All you do is divide your Gross amount by your ratio.

For example, if you bought a table for a Gross price of £180 including 20% VAT and want to work out the Nett price excluding VAT, you do this:

180 ÷ 1.20 = 150

So the Nett amount excluding VAT is £150.

Finding the VAT amount from a Gross amount

Sometimes you have a total Gross amount and need to find the amount of VAT it contains. The simplest method is to find the Nett amount (see Removing VAT above) and take the Nett away from the Gross.

Going back to our example, if you bought a table for a Gross price of £180 including 20% VAT and want to find the amount of VAT included in the price, you do this:

180 ÷ 1.20 = 150

and then

180 - 150 = 30

So the amount of VAT in this case is £30.

Now you know all about calculating VAT. It's not rocket science, but i'm sure you'll agree that using our VAT Calculator is even easier.