VAT Calculator

This is the common case in the UK and EU, where the price on the shelf already includes VAT. You cannot simply take the rate off the gross figure, because the VAT was applied to the smaller net price and not to the total. Divide instead: net = gross ÷ (1 + rate) At a 20% rate, a £120 gross price is 120 ÷ 1.20 = £100 net, with £20 of VAT. Taking 20% of £120 would give £24, which is wrong by exactly the rate again — the overstatement is always the rate itself, so a 25% rate overstates by 25%. There is a shortcut worth knowing: for any rate, the VAT portion of a gross price is the VAT fraction rate ÷ (1 + rate). At 20% that is 0.20 ÷ 1.20, or one sixth of the gross — which is why £120 contains £20 and why anyone who works with 20% VAT daily divides by six without thinking. At 25% the fraction is one fifth; at 5% it is one twenty-first.

Selling business to business, or quoting ex-VAT? Then you go the other way: VAT = net × rate, and gross = net + VAT. A £100 net price at 20% becomes £120 gross. Switch the mode field to work this direction. The one-step version is to multiply by 1 + rate — × 1.20 at 20%, × 1.19 at 19%, × 1.05 at 5%. Which direction you need usually depends on who you sell to. Prices quoted to consumers are conventionally shown VAT-inclusive, so a consumer-facing business tends to work backwards from the gross. Prices quoted between businesses are conventionally shown VAT-exclusive, because a VAT-registered buyer normally recovers the VAT and cares only about the net. A quote that does not say which convention it uses is a quote worth clarifying: at 20%, the difference is a fifth of the invoice.

The arithmetic above is all you need to use the calculator, but the mechanism explains why VAT behaves the way it does. Unlike a retail sales tax, which is collected once at the final sale, VAT is collected at every stage — and each business reclaims the VAT it paid on its own inputs. Follow £150 of final value at a 20% rate: a manufacturer sells to a wholesaler for £100 plus £20 of VAT and remits that £20. The wholesaler sells on at £150 plus £30 of VAT, reclaims the £20 it paid, and remits the £10 difference. The tax authority has collected £30 in total, which is exactly 20% of the final £150 — the same amount a single-stage tax would have raised. Two consequences follow. First, VAT is not a cost to a registered business in the middle of the chain; it is collected and passed along, and only the final consumer bears it. That is why business budgets and margin calculations are done on net figures. Second, the VAT you see in a price is not accumulating at each step — the reclaim mechanism prevents tax on tax, which is precisely the flaw the design exists to avoid. A practical note: businesses below a national registration threshold generally do not charge VAT at all, so not every price you meet contains any.

There is no built-in rate table here, deliberately. VAT is set nationally, rates change, and any list would be wrong within a year. The UK runs a standard rate of 20%, a reduced 5% band for a defined set of goods and services, and a zero rate for others — and zero-rated is not the same as exempt, a distinction that matters a great deal to a business because it affects whether input VAT can be reclaimed. EU member states set their own standard rates, which in recent years have sat roughly between the high teens and the high twenties, each with its own reduced categories and its own list of what falls into them. Outside the EU, many countries use an equivalent GST — Australia, Canada, India, New Zealand, Singapore and others — with the same arithmetic under a different name. Canada layers federal and provincial components, which is a good reminder to use the combined rate that actually appears on the invoice rather than the headline national one. The practical instruction is unchanged: find the rate that applies to your product in your jurisdiction, from the official source, and enter it. The references below are the authoritative starting points for the UK and the EU.

The two taxes raise money the same way and feel completely different at the till. Visibility. VAT is normally quoted inside the advertised consumer price, so the shelf price is what you pay. US sales tax is added at checkout, so the shelf price is not. Someone used to one system consistently mis-estimates the other, and reverse-calculating VAT is a routine task precisely because it is buried in the price. Collection point. Sales tax is charged once, at the final retail sale, with resellers buying tax-free on an exemption certificate. VAT is charged at every stage with a reclaim mechanism. The revenue ends up similar; the audit trail and the compliance burden do not. Who sets it. VAT rates are national, so one number covers a whole country. US sales tax is set by states and stacked with county, city and district rates, so the combined rate can differ between neighbouring towns. Refunds to visitors. Because VAT sits inside the price and is intended for domestic consumption, many countries operate refund schemes for goods exported by non-resident travellers. There is no general equivalent for US sales tax. The arithmetic on this page works identically for all of them. Only the convention about whether the tax is already inside the number changes — which is exactly what the mode field is for.