To add 20% VAT to a price, multiply it by 1.2. To take VAT out of a price that already includes it, divide by 1.2, not subtract 20%. For example, £120 plus VAT is £144, and £144 including VAT is £120 before VAT, of which £24 is the tax.
What VAT is and the UK rates
Value Added Tax (VAT) is a tax on most goods and services, collected by VAT-registered businesses and passed to HMRC. In the UK there are three rates:
- Standard rate: 20%. Applies to most goods and services.
- Reduced rate: 5%. For example, domestic fuel.
- Zero rate: 0%. For example, most food and children’s clothes. The item is still “VAT-able” but no VAT is charged.
Some items are exempt or outside the scope of VAT altogether, which is different from zero-rated. If you are unsure which rate applies, check GOV.UK. The same goes for the turnover level at which a business must register for VAT, which changes from time to time.
How to add VAT to a net price
A net price is the price before VAT. At the 20% standard rate:
Gross price = net price × 1.2
Example: a service costs £120 net.
- VAT = £120 × 0.20 = £24.00
- Price including VAT = £120 + £24 = £144.00
For the 5% rate, multiply by 1.05 instead.
How to remove VAT from a gross price
A gross price already includes VAT. At 20%:
Net price = gross price ÷ 1.2
Example: a receipt shows £144 including VAT.
- Net price = £144 ÷ 1.2 = £120.00
- VAT = £144 − £120 = £24.00
The VAT is one sixth of the gross price at 20%, because 24 is one sixth of 144. A common mistake is to take 20% off £144, which gives £115.20. That is wrong, because the 20% was added to the smaller net figure, not to £144.
Quick reference
| Starting figure | Rate | Calculation | Result |
|---|---|---|---|
| £120 net | 20% | × 1.2 | £144.00 gross |
| £144 gross | 20% | ÷ 1.2 | £120.00 net |
| £100 net | 5% | × 1.05 | £105.00 gross |
| £100 net | 0% | no change | £100.00 gross |
Why the percentage maths trips people up
Adding a percentage and then removing the same percentage does not bring you back to where you started, because the second percentage applies to a different base. This is the same principle behind price rises and sale reductions, covered in Percentage change, increases and discounts. If you want a refresher on the basic method, see How to calculate percentages.
Where VAT comes up in practice
- Freelancers and small businesses quoting prices to customers, who may or may not be able to reclaim VAT.
- Shopping for goods where prices are shown with or without VAT.
- Invoices, where VAT should be shown as a separate line.
- Working out pay: VAT does not apply to your salary, but contractors setting a day rate may need to consider it. See Hourly rate to salary, and how to work out overtime for converting rates.
Checking prices and invoices
When you receive a quote, check whether it is shown with or without VAT, since the difference at 20% is a fifth more. Business invoices usually show the net amount, the VAT and the total separately, which makes errors easier to spot. If you are comparing a price quoted without VAT to one that includes it, convert one of them first so you are comparing like with like. The calculator does this in one step and shows the VAT amount separately, which is handy for keeping records. Keep in mind that the figures are estimates based on the rate you choose, so confirm the correct rate for the item before relying on them.
Note: This is general information, not tax advice. VAT rules depend on your circumstances and the goods or services involved; check GOV.UK or ask an accountant for anything important.
Try the calculator
Enter a price, pick a rate and choose whether to add or remove VAT in the VAT to see the net price, the VAT and the gross price.
Frequently asked questions
How do I add 20% VAT?
Multiply the net price by 1.2. For example, £120 becomes £144, which is £120 plus £24 VAT.
How do I take VAT out of a total?
Divide the VAT-inclusive total by 1.2 for the standard 20% rate. £144 divided by 1.2 is £120, so £24 of the total is VAT.
What is the difference between zero-rated and exempt?
Zero-rated goods are VAT-able at 0%, while exempt supplies are outside the VAT charge entirely. The difference matters for businesses reclaiming VAT, so check GOV.UK.
Is there a quick way to find the VAT in a 20% price?
Yes. At 20%, the VAT is one sixth of the gross price. So £144 gross contains £24 of VAT.