VAT Calculator - Add or Remove Tax from a Price
VAT calculator
What this tool does
Adding tax to a price is easy arithmetic. Taking it back out is where people go wrong, and the mistake is quiet: the numbers look plausible and the invoice still balances. This page does both directions and shows all three figures at once, so the error has nowhere to hide.
How to use it
- 1 Choose whether your amount already includes the tax.
- 2 Type the amount and the rate that applies.
- 3 Read net, tax and gross together and check the total is what you expect.
To remove VAT, divide - never subtract
The tax was calculated on the net price, not on the gross one, so it is not 20% of the total you are holding. On a gross of 120 at 20%, the net is 120 divided by 1.20. Subtracting 20% instead gives 96, which is wrong by four - and nothing in the invoice will tell you.
| Method on a gross of 120 at 20% | Net | Tax |
|---|---|---|
| Divide by 1.20 - correct | 100.00 | 20.00 |
| Subtract 20% - wrong | 96.00 | 24.00 |
Rounding belongs on the line, not the total
Tax is normally rounded per invoice line, then the lines are summed. Rounding the total instead can leave you a cent or two away from what an accounting system produces, and on a long invoice the gap grows. If a figure has to match someone else's books, round the same way they do.
One rate does not cover everything you sell
Most countries run a standard rate plus reduced ones for things like food, books, medicine or transport, and some items are zero-rated or exempt - which are not the same thing on a tax return. Rates also change by law, so check the current figure for the category rather than reusing last year's.
Displayed price and charged price are different questions
In much of Europe consumer prices must be shown with tax included, while business-to-business quotes are usually net. Some countries add the tax only at the till. When a price surprises you, the first question is which convention it was written under, not whether the arithmetic is wrong.