How to Calculate VAT
Adding VAT to a price is one multiplication; taking it out of a price that already includes VAT is where most mistakes happen. This guide shows both calculations with UK figures, the rounding HMRC allows on invoices, and the rates of 15 other countries.
Adding VAT to a Net Price
Multiply the net price by the rate and add the result. At the UK standard rate of 20%:
- VAT = net × 20% = £100 × 0.20 = £20
- Gross = net + VAT = £120, or net × 1.2 in one step
At the reduced rate of 5% the multiplier is 1.05, and at the zero rate the gross price equals the net price, although the sale is still a taxable supply.
Taking VAT Out of a Gross Price
A price that includes VAT already contains the tax, so taking 20% of it gives the wrong answer. The VAT in a gross price is rate ÷ (100 + rate) of it. HMRC calls this the VAT fraction: at 20% it is 20/120, one sixth; at 5% it is 5/105, one twenty-first.
| Gross price | VAT fraction | VAT | Net price |
|---|---|---|---|
| £120.00 at 20% | 1/6 | £20.00 | £100.00 |
| £2.40 at 20% | 1/6 | £0.40 | £2.00 |
| £105.00 at 5% | 1/21 | £5.00 | £100.00 |
| £99.99 at 20% | 1/6 | £16.665 → £16.66 or £16.67 | £83.33 or £83.32 |
The £2.40 example is the one HMRC uses in VAT Notice 700. The last row shows why rounding matters: one sixth of £99.99 is not a whole number of pence, so the result depends on whether the VAT is rounded down or to the nearest penny, and on whether the VAT or the net amount is rounded first.
UK VAT Rates
The rates in force on 12 October 2026, as listed on GOV.UK:
| Rate | Type | Applies to | Legal basis |
|---|---|---|---|
| 20% | Standard rate | Most goods and services. | Value Added Tax Act 1994, section 2 |
| 5% | Reduced rate | Some goods and services, such as home energy and children's car seats. | Value Added Tax Act 1994, section 29A and schedule 7A |
| 0% | Zero rate | Zero-rated goods and services, such as most food and children's clothes. | Value Added Tax Act 1994, section 30 and schedule 8 |
Rounding VAT on Invoices
VAT Notice 700 (section 17.5) lets businesses that issue VAT invoices round the total VAT on an invoice down to a whole penny. When VAT is worked out line by line, the VAT on each line may be rounded down to the nearest 0.1p, or rounded to the nearest 1p or 0.5p, as long as the same method is used consistently. Retailers are treated differently (section 17.6): they must not round the VAT figure down, but may round each calculation up or down to the nearest penny.
Other countries have their own rules. Japan, for example, requires one rounding per rate on each qualified invoice and does not allow rounding every item and adding up the results. The VAT calculator lets you choose half-up, down or up rounding, and rounding per line or once per rate.
Invoices with More Than One Rate
When an invoice mixes rates, such as standard-rated goods and zero-rated food, add up the lines of each rate first and show the VAT for each rate. Rounding once per rate and rounding every line can differ by a penny or two on long invoices, which is why accounting software asks which method to use. In the calculator's "Several lines" mode, each line has its own rate and the summary shows the net, VAT and gross for each rate.
VAT Rates in 16 Countries
Standard and reduced rates on 12 October 2026, checked against each tax authority's own publications. The calculator picks the rates by the date of the sale and shows the source for each one.
| Country | Tax | Standard rate | Other rates | Temporary and special rates |
|---|---|---|---|---|
| South Korea | 부가가치세 | 10% | – | – |
| Japan | 消費税 | 10% | 8% | – |
| China | 增值税 | 13% | 9%, 6% | 3% Simplified levy rate; 1% Simplified levy rate (until December 31, 2027) |
| Taiwan | 營業稅 | 5% | – | – |
| Germany | Umsatzsteuer | 19% | 7% | – |
| France | TVA | 20% | 10%, 5.5%, 2.1% | – |
| Italy | IVA | 22% | 10%, 5%, 4% | – |
| Spain | IVA | 21% | 10%, 4% | – |
| Portugal | IVA | 23% | 13%, 6% | Azores 16% / 9% / 4%; Madeira 22% / 12% / 4% |
| United Kingdom | VAT | 20% | 5%, 0% | – |
| Türkiye | KDV | 20% | 10%, 1% | – |
| Russia | НДС | 22% | 10% | – |
| Thailand | ภาษีมูลค่าเพิ่ม | 7% | – | until September 30, 2027 |
| Vietnam | Thuế giá trị gia tăng | 10% | 5% | 8% Temporary reduced rate (until December 31, 2026) |
| Indonesia | PPN | 12% × 11/12 = 11% | – | 12% Luxury goods |
| Mexico | IVA | 16% | 0% | 8% Border-region incentive (until December 31, 2026) |
Not included: the United States, where sales tax is set by states, counties and cities and added at the till, and Brazil, where several taxes apply, some calculated inside the price, and where 2026 is the test year of the new CBS and IBS (Lei Complementar 214/2025).
Frequently Asked Questions
What is 20% VAT on £50?
£10, so the price including VAT is £60. To go back from £60, divide by 1.2 or take one sixth of it as the VAT.
Why is removing 20% from a gross price wrong?
The 20% applies to the net price, not to the gross price. Taking 20% of £120 gives £24 instead of £20; the VAT in a gross price is one sixth of it at 20%.
Does zero-rated mean exempt?
No. Zero-rated goods and services are taxable at 0%, while exempt ones carry no VAT at all, and the difference matters for what a business can reclaim. GOV.UK lists which goods and services are zero-rated or exempt.
Can I use the calculator for another rate?
Yes. Enter any rate under "Other rate"; the calculation and rounding work the same way.
Sources
Source: GOV.UK: VAT rates · Last checked:
Source: GOV.UK: VAT guide (VAT Notice 700), 17.5 and 17.6 · Last checked: