To add VAT at the standard rate, multiply the net price by 1.2. To remove VAT from a price that already includes it, divide the gross price by 1.2. For the reduced rate of 5%, use 1.05 instead of 1.2.
That is the whole method. The rest of this page shows how it works, step by step, with examples.
The VAT fraction
Every VAT sum uses one number called the VAT fraction. You find it by turning the rate into a decimal and adding 1.
- At 20%: 20 divided by 100 is 0.2, plus 1 gives 1.2
- At 5%: 5 divided by 100 is 0.05, plus 1 gives 1.05
Once you have the fraction, you can add VAT or take it off with a single step.
How to add VAT (net to gross)
Use this when you have a price before VAT and want the total the customer pays.
Multiply the net price by the VAT fraction.
Example at 20% Net price £500. £500 times 1.2 = £600. The VAT is £600 minus £500, which is £100.
Example at 5% Net price £500. £500 times 1.05 = £525. The VAT is £25.
How to remove VAT (gross to net)
Use this when you have a price that already includes VAT and want the amount before VAT.
Divide the gross price by the VAT fraction.
Example at 20% Gross price £600. £600 divided by 1.2 = £500. The VAT is £600 minus £500, which is £100.
Example at 5% Gross price £525. £525 divided by 1.05 = £500. The VAT is £25.
[ Infographic: Add VAT vs remove VAT ]
Brief: two side by side arrows. One shows net £500 times 1.2 to gross £600 (add VAT). The other shows gross £600 divided by 1.2 to net £500 (remove VAT).
Alt text: Adding VAT multiplies the net price by 1.2, removing VAT divides the gross price by 1.2.
Caption: Multiply to add VAT, divide to remove it.
The one sixth shortcut
At the standard rate of 20%, the VAT is always one sixth of the gross price. So you can split a VAT inclusive total fast.
Gross price £600. £600 divided by 6 = £100 VAT. Net price is £600 minus £100, which is £500.
This works only at 20%. At 5% the VAT is one twenty first of the gross, which is harder to do in your head, so dividing by 1.05 is easier.
The mistake most people make
Do not take 20% off a gross price to remove VAT. It gives the wrong answer.
£600 minus 20% is £480. That is too low.
The reason is simple. VAT is worked out on the net price, not the gross price. 20% of the smaller net figure is less than 20% of the larger gross figure. So you divide by 1.2 to go back to the net price. £600 divided by 1.2 is £500, which is correct.
Work out VAT in four steps
- Decide if your price is net (before VAT) or gross (after VAT).
- Find the VAT fraction for your rate: 1.2 for 20%, 1.05 for 5%.
- Multiply by the fraction to add VAT, or divide by it to remove VAT.
- The VAT amount is the gap between the net and gross figures.
If you would rather skip the maths, type your figure into the VAT calculator and pick add VAT or remove VAT.
Frequently asked questions
How do you calculate VAT? Multiply the net price by 1.2 to add 20% VAT, or divide the gross price by 1.2 to remove it. For the 5% rate, use 1.05.
How do I work out VAT from a gross amount? Divide the gross amount by 1.2 at the standard rate. The result is the net price. The VAT is the gross amount minus the net price.
How much VAT is in a gross price at 20%? The VAT is one sixth of the gross price. For example, £120 gross holds £20 of VAT, leaving £100 net.
How do I add 5% VAT? Multiply the net price by 1.05. For example, £200 times 1.05 is £210, so the VAT is £10.
Why can I not just subtract 20% to remove VAT? Because VAT is worked out on the net price, not the gross price. Subtracting 20% gives too low a figure. Divide by 1.2 instead.