How to use the VAT calculator
The Add or remove VAT tool converts between net and gross prices.
- Choose the direction. Add VAT for a price before tax, such as a supplier quote. Remove VAT for a price that already includes it, such as a receipt.
- Enter the amount and the currency. The currency only changes how results are displayed.
- Choose a VAT rate. The list holds example standard rates; choose Custom rate for a reduced rate or any other rate.
The chart shows the same price at other rates, and the table scales it to larger quantities.
The Input vs output VAT tool is for VAT-registered businesses: enter sales and purchases for a period, both excluding VAT, to see what you owe or can reclaim.
The formulas
Removing VAT: Net = Gross ÷ (1 + r) VAT = Gross × r ÷ (1 + r)r is the VAT rate as a decimal (20% = 0.20). The factor r ÷ (1 + r) is the share of a gross price that is VAT: 1/6 at 20%.
A worked example
A supplier quotes a net price of €100.00. At 20%, the VAT is €20.00 and the gross price is €120.00. Multiplying by 1.2000 does it in one step.
Going the other way, a receipt for €120.00 at the same rate contains a net price of €100.00 and €20.00 of VAT: 16.67% of the amount paid.
Why you divide to remove VAT
The most common VAT mistake is subtracting the rate from a gross price. Taking 20% off €120.00 gives €96.00, which is €4.00 short of the real net price. The tax was calculated on the smaller net amount, so as a share of the gross price it is always less than the headline rate:
| VAT rate | Multiply net by | VAT share of the gross price |
|---|---|---|
| 19% | 1.1900 | 15.97% |
| 20% | 1.2000 | 16.67% |
| 21% | 1.2100 | 17.36% |
| 22% | 1.2200 | 18.03% |
| 25% | 1.2500 | 20.00% |
| 27% | 1.2700 | 21.26% |
In the UK and the EU, consumer prices generally include VAT, while business prices are usually quoted net, so check which kind of price you have.
Input VAT and output VAT
A VAT-registered business acts as a collector. It adds output VAT to its sales and pays input VAT on the goods and services it buys for the business. On each return it pays the difference to the tax authority.
In the default example, sales of €60,000.00 including VAT carry €10,000.00 of output VAT. Purchases carried €6,000.00 of input VAT, so the business pays €4,000.00. That is exactly the rate applied to its value added of €20,000.00, which is where the name comes from. Each business in a supply chain pays tax only on its own margin, and the consumer at the end bears the whole amount in the shelf price.
When purchases exceed sales in a period, the result turns negative. With purchases of €60,000.00, the same business could reclaim €2,000.00. That is normal for exporters and for businesses buying equipment.
Why the US uses sales tax instead
The US has no federal VAT. States and localities levy retail sales taxes, which are collected once, at the final sale to the consumer, and business purchases for resale are exempt. A VAT collects the tax in pieces along the supply chain, which makes evasion harder because each business needs its suppliers’ invoices to reclaim input tax.
US sales taxes were set up by states long before VAT spread around the world, and consumption taxes remain a mainly state and local revenue source. A federal VAT would sit on top of those state taxes, and proposals for one have not passed Congress. For US purchases, use the sales tax calculator instead.
What this calculator does not include
- Reduced, zero and exempt rates for items such as food, books or energy. Enter the right rate as a custom rate.
- Registration thresholds and special schemes for small businesses.
- Cross-border rules, including the reverse charge, import VAT and distance selling.
- Partial recovery. Businesses with exempt sales, and some purchases such as cars, may recover only part of the input VAT.
- Rounding. Invoices may round VAT per line or per unit.