Guide
How to work out VAT on a price without getting the arithmetic wrong
A plain guide to adding VAT to a net price, stripping VAT from a gross price, and understanding what the tax portion actually represents.
Adding VAT starts with the net price
If a price is quoted without VAT, multiply it by the VAT rate and add the result. At 20% UK VAT, a net price of 100 becomes 120 gross. The 20 in between is the tax. Shops, contractors, and invoices all work this way when they quote exclusive of VAT.
Stripping VAT out is different arithmetic
If a price already includes VAT, you cannot simply remove 20%. Dividing a 120 gross price by 1.2 gives you the net 100 and a VAT amount of 20. Subtracting 20% from 120 gives you 96, which is wrong. The VAT Engine handles both directions so you do not have to remember which formula applies.
When the rate is not 20%
Some goods attract reduced rates or zero rates. The arithmetic is the same — multiply or divide by the relevant multiplier — but the rate changes. When in doubt about which rate applies to a specific good or service, HMRC guidance or a tax professional is the right source, not a calculator.