How to Add or Remove VAT – Formulas and Examples
The simple formulas for adding VAT to a price and taking VAT out of a VAT-inclusive total, with worked examples at the UK's 20% and 5% rates.
By the Handy Tools Desk team · Published
VAT sums look easy until you need to go backwards. Adding VAT to a price is one multiplication, but taking VAT out of a price that already includes it catches people out all the time – including on invoices and expense claims. This article gives you both formulas, explains the common mistake, and walks through examples at the UK rates.
You can also do all of this instantly with our VAT calculator, which works in your browser.
The UK VAT rates
The UK has three VAT rates:
- Standard rate: 20% – most goods and services.
- Reduced rate: 5% – some items, such as home energy and children's car seats.
- Zero rate: 0% – for example most food and children's clothes.
Which rate applies to a particular product is decided by HMRC's rules, not by the seller. If you are unsure, the GOV.UK VAT rates page linked at the end of this article has the full list.
How to add VAT to a price
When you have a price without VAT (the net price), multiply it by the VAT rate and add the result:
Gross = Net × (1 + rate)
At the standard rate that means multiplying by 1.2.
Example: a service costs £250 before VAT.
- VAT at 20%: £50.00
- Price including VAT: £300.00
Example at the reduced rate: £80 of goods at 5%.
- VAT: £4.00
- Price including VAT: £84.00
How to remove VAT from a price (reverse VAT)
When you have a price that already includes VAT (the gross price) and want to know the net amount and the VAT inside it, divide by 1 plus the rate:
Net = Gross ÷ (1 + rate), and VAT = Gross − Net
Example: a receipt for £120 including VAT at 20%.
- Net price: £100.00
- VAT included: £20.00
Example: a £63 bill including VAT at 5%.
- Net price: £60.00
- VAT included: £3.00
The most common VAT mistake
The mistake is to take 20% off a VAT-inclusive price. On a £120 receipt that gives £96 – which is wrong, because the VAT was added to the net price, not the gross one. Working backwards from £96 by adding 20% gives £115.20, not £120.
The correct answer is the one above: a net price of £100.00 and VAT of £20.00. Taking a straight percentage off always understates the net price and overstates the VAT.
A shortcut worth remembering
At the standard rate, the VAT inside any VAT-inclusive price is exactly one sixth of it (because 20 ÷ 120 = 1 ÷ 6). At the reduced rate, it is one twenty-first (5 ÷ 105). So on a £600 bill at the standard rate, the VAT is £600 ÷ 6 = £100.00.
Quick reference table
| Gross price (incl. VAT) | Net at 20% | VAT at 20% |
|---|---|---|
| £12 | £10.00 | £2.00 |
| £60 | £50.00 | £10.00 |
| £240 | £200.00 | £40.00 |
| £1,500 | £1,250.00 | £250.00 |
Rounding
VAT is normally worked out to the penny, and small rounding differences can appear when you add up many lines. HMRC lets businesses round VAT on each line or on the invoice total, as long as they do it consistently. Our calculator shows amounts to the penny.
Putting it on an invoice
A VAT invoice shows the net amount, the VAT rate, the VAT amount and the total. Our free invoice generator lays that out for you and makes a PDF in your browser.
Working in the UAE?
The UAE has its own VAT at 5%. The formulas are the same – multiply by 1.05 to add it and divide by 1.05 to remove it – and our UAE VAT calculator does it in dirhams.
Frequently asked questions
What is the VAT on £100?
Adding standard-rate VAT to £100 gives £20.00 of VAT and a total of £120.00. If £100 already includes VAT, the net price is £83.33 and the VAT inside it is £16.67.
Why can't I just take 20% off?
Because the 20% was added to the smaller net price. Taking 20% off the bigger gross price removes too much. Dividing by 1.2 is the only way to get back to the original net price.
Do I have to charge VAT?
Only VAT-registered businesses charge VAT. Registration becomes compulsory once your VAT-taxable turnover passes the threshold set by HMRC, and some businesses register voluntarily below it. GOV.UK has the current threshold and how to register.
Sources
Figures checked against these sources on 13 November 2026.