VAT Calculator

Adding VAT and taking it off are not the same sum

To add VAT, multiply the net figure by one plus the rate as a decimal. At 20 per cent that is a multiplication by 1.2, so 100.00 becomes 120.00.

To take VAT out of a price that already includes it, divide by the same 1.2. A gross 120.00 comes back to a net 100.00 and 20.00 of tax.

The mistake almost everyone makes once is subtracting 20 per cent from the gross instead. Twenty per cent of 120.00 is 24.00, which leaves 96.00, and it is wrong by four pounds in every hundred. The tax was charged on the net figure, so the percentage has a different base going back.

The rates you are most likely to type

In the United Kingdom the standard rate is 20 per cent. A reduced rate of 5 per cent covers things like domestic fuel and power and children's car seats, and a zero rate covers most food, books, newspapers and children's clothing.

Zero rated is not the same as exempt. A zero rated sale is still a taxable sale at a rate of nothing, which keeps you able to reclaim the VAT you paid on your own costs. An exempt sale does not.

Ireland's standard rate is 23 per cent, and rates across the European Union generally sit between 17 and 27 per cent. The United States has no VAT at all: it uses state and local sales tax, which is charged differently and is not what this calculator does.

The box takes any rate, because no calculator can know which rate your particular supply attracts.

What an invoice has to show once you are registered

A VAT invoice carries your business name and address, your VAT registration number, a unique invoice number, the invoice date and the tax point if it differs, and the customer's name and address.

For each line it needs the description, the quantity, the net amount and the rate applied. At the foot it needs the total net, the total VAT and the gross.

Registration becomes compulsory once your taxable turnover passes the threshold in any rolling twelve month period. The figure is set by HMRC and has been raised more than once, so check the current one rather than a number you remember. You can also register voluntarily below it, which lets you reclaim VAT on costs but obliges you to charge it.

Rounding, and the penny that will not match

This calculator rounds to two decimal places for display, which is what almost every accounts package does.

HMRC allows VAT to be worked out and rounded per line, or on the invoice total. The two methods can differ by a penny or two on a long invoice, which is the usual reason a customer's figure disagrees with yours.

If a customer queries a penny, say which method you used. It is almost never an error, and saying so ends the conversation.

What this calculator deliberately does not decide

It does not decide whether your sale is standard rated, reduced, zero rated or exempt.

It does not handle the reverse charge, place of supply for cross border services, the margin scheme for second hand goods, or the flat rate scheme.

Those depend on what you sell and to whom, and getting them wrong is expensive. The arithmetic here is exact; the liability is a question for your accountant.