How it’s calculated
To add VAT, multiply the net price by the rate. To find the VAT inside a VAT-inclusive price, HMRC uses the VAT fraction: rate ÷ (100 + rate). At 20% that is 20/120, which is one-sixth (VAT Notice 700, section 7.3.1).
Example: 100 net at 20% gives 20 VAT and 120 gross. Removing VAT from 120: 120 × 20/120 = 20 VAT, so net is 100. Note that taking 20% off 120 (giving 96) is wrong.
This is general arithmetic. Whether VAT applies and at which rate depends on the goods or services; check the official guidance or an adviser.
Frequently asked questions
How do I remove 20% VAT from a price?
Divide the gross price by 1.2, or take one-sixth of it as the VAT. For 240 gross: VAT = 240 ÷ 6 = 40, net = 200.
What is the VAT fraction?
The share of a VAT-inclusive price that is VAT: rate ÷ (100 + rate). It is 1/6 at 20% and 1/21 at 5%.
What are the UK VAT rates?
The standard rate is 20%, the reduced rate is 5% and some goods are zero-rated (0%). Check GOV.UK for which rate applies to what.
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Sources
- VAT guide (VAT Notice 700), section 7.3.1 VAT fractions — HM Revenue & Customs (GOV.UK)
- VAT rates — GOV.UK
- Rates of VAT on different goods and services — HM Revenue & Customs (GOV.UK)
Formulas are taken from the free public references above. Results are provided “as is” for informational and educational purposes only. See our disclaimer.
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