Net is the price before VAT. Gross is the price after VAT is added. The VAT amount is the difference between the two. For example, £100 net plus 20% VAT gives £120 gross, with £20 of VAT in between.
Net amount
The net amount is the price on its own, before any VAT. It is what the seller keeps after passing the VAT to HMRC. On an invoice, the net figure is the value of the goods or services before tax.
Gross amount
The gross amount is the full price including VAT. It is what the customer actually pays. Shelf prices in UK shops are usually gross, because the VAT is already built in.
How they fit together
net price + VAT = gross price.
| Net | VAT at 20% | Gross |
|---|---|---|
| £100 | £20 | £120 |
| £250 | £50 | £300 |
| £1,000 | £200 | £1,200 |
[ Infographic: Net, VAT and gross ]
Brief: a simple bar split into the net amount and the VAT amount, which together make the gross price.
Alt text: A price bar showing the net amount plus VAT making up the gross price.
Caption: Net plus VAT equals gross.
Moving between net and gross
- To go from net to gross at 20%, multiply by 1.2. £100 times 1.2 is £120.
- To go from gross to net at 20%, divide by 1.2. £120 divided by 1.2 is £100.
For the reduced rate of 5%, use 1.05 instead.
Why it matters
Mixing up net and gross leads to pricing and invoice errors. A quote given as a net figure can surprise a customer who expected it to include VAT. On the other side, treating a gross price as net can leave a business short once it pays the VAT to HMRC. Always be clear which figure you mean.
Frequently asked questions
What is the difference between net and gross? Net is the price before VAT. Gross is the price after VAT is added.
Is net before or after VAT? Net is before VAT. Gross is after VAT.
How do I turn net into gross? Multiply the net price by 1.2 at the standard rate, or by 1.05 at the reduced rate.
How do I turn gross into net? Divide the gross price by 1.2 at the standard rate, or by 1.05 at the reduced rate.
Are shop prices net or gross? Shop prices in the UK are usually gross, because they already include VAT.