VAT & Sales Tax Calculator

Adding vs. removing tax

Adding VAT is the easy direction: multiply the net price by the rate and add it on. Removing VAT trips people up, because you cannot just subtract the percentage — the tax was charged on the net amount, not the gross. To strip it out you divide the gross by one-plus-the-rate.

This calculator does both. Switch the mode, enter the figure you have, and it shows the net, the tax, and the gross so your invoices and bookkeeping reconcile.

Why the 'remove' maths matters

On a gross price of 120 at a 20% rate, the VAT is 20 and the net is 100 — not 96. Subtracting 20% of the gross would understate the net and overstate nothing useful. Getting this right keeps your tax returns accurate and your margins honest.

Removing VAT is not subtracting the VAT percentage

This is the arithmetic slip that turns up in real invoices. To take 20% VAT out of a £120 gross figure you divide by 1.20, which gives £100 of net and £20 of VAT. Subtracting 20% of £120 gives £96 — wrong by £4, and wrong in the direction that leaves you short when the return is due. The larger the invoice, the more the error costs.

The other trap is the threshold. Most VAT systems require registration once turnover passes a set figure, measured on a rolling basis rather than by calendar year, and crossing it obliges you to charge VAT on everything from that point. If your clients are VAT-registered businesses they reclaim it and barely notice; if they are consumers, registration is effectively a price rise you absorb or pass on. Know where your threshold sits before you get near it, not after.