VAT Calculator

Pick a direction, enter an amount and a rate, and the calculator splits the price into its net, VAT and gross parts. Add mode treats the amount as a net price and puts VAT on top. Remove mode treats it as a gross price that already includes VAT and works backwards. The rate defaults to the UK standard 20%, but any rate works — type 19 for Germany or 23 for Ireland.

What VAT actually taxes

Value added tax is a consumption tax collected in fragments along a supply chain. Every registered business charges VAT on what it sells and reclaims the VAT it paid on what it bought, so the amount it hands to the government reflects only the value it added at its own stage. The full burden settles on the final consumer, who has nothing to reclaim it against. That design solved a specific flaw in older sales taxes, and the tax is younger than most people assume.

Where the tax came from

The idea is usually traced to Georg Wilhelm von Siemens, the German industrialist, who around 1918 proposed a refined turnover tax to replace the cascading levy Germany then used — a tax charged afresh at every sale, which quietly penalised long supply chains and rewarded firms that swallowed their suppliers to avoid it. Germany did not act on the suggestion. Its cumulative turnover tax, imposed on 1 August 1918 in the closing months of the First World War, survived until 1 January 1968.

The first working version was engineered in France. Maurice Lauré, an inspecteur des finances serving as deputy director of the Direction générale des Impôts, is credited with turning the concept into administrable law. France created his taxe sur la valeur ajoutée by the law of 10 April 1954, at first for manufactured goods, and a law of 6 January 1966 pushed by the economy minister Valéry Giscard d'Estaing extended it down to retail trade. The attraction was that VAT raised large sums without the cascade and could be rebated cleanly at the border, leaving exports untaxed.

The Treaty of Rome, signed in March 1957, built a common market in which the members' differing sales taxes distorted trade. The European Commission set up a Fiscal and Financial Committee in 1960 under the German economist Fritz Neumark, and its 1962 report judged the French VAT the best template for harmonisation. On 11 April 1967 the Council adopted the first two VAT directives, obliging members to replace their turnover taxes with a common system. Belgium, Italy, Luxembourg, the Netherlands and West Germany followed. VAT has since spread far beyond Europe: as of January 2025, 175 of the 193 United Nations member states operated one.

VAT arrives in Britain

Britain came to VAT by treaty. Joining the EEC on 1 January 1973, alongside Denmark and Ireland, required it to adopt the common tax. On 1 April 1973 VAT swept away two older levies: Purchase Tax, imposed on 21 October 1940 to curb wartime waste and charged at rates scaled to how much of a luxury each item was judged to be, and the Selective Employment Tax of 1966. The Conservative chancellor Anthony Barber set a single rate of 10%.

The rate has moved with the politics of the day since then. Denis Healey cut it to 8% in July 1974 while adding a higher band on luxury goods that rose as high as 25% before being abolished. Geoffrey Howe raised the standard rate to 15% in 1979, Norman Lamont lifted it to 17.5% in 1991, and after a temporary cut to 15% during the 2008-09 financial crisis it returned to 17.5%. George Osborne set the current 20% rate on 4 January 2011.

How a business accounts for it

A registered trader records output VAT on its sales and input VAT on its purchases, then pays HM Revenue and Customs the difference, usually each quarter. When purchases carry more VAT than sales — common for exporters and for firms buying stock ahead of a busy season — the trader reclaims the balance instead. This netting is what stops the tax cascading: each link in the chain remits only the VAT on its own margin, and those fragments across the whole chain add up to the single rate applied to the final retail price.

The formula in both directions

Adding VAT is plain percentage arithmetic:

VAT = net × r ÷ 100

With the defaults — 250 at 20% — the VAT is 250 × 0.20 = 50.00 and the gross price is 300.00.

Removing VAT is where people slip. The 20% was charged on the net figure, so you cannot take 20% off the gross. You divide instead:

net = gross ÷ (1 + r ÷ 100)

Switch the calculator to remove mode with the same 250 and the net comes out at 250 ÷ 1.20 = 208.33, leaving 41.67 of VAT. Subtracting 20% would have given 200.00 — wrong by 8.33. HMRC's VAT guide (Notice 700, section 7.3.1) writes the same arithmetic as a VAT fraction: at 20% the VAT inside a gross price is exactly one sixth of it, and 250 ÷ 6 gives the same 41.67. The fraction is simply the rate over one hundred plus the rate: 20/120 reduces to 1/6, and the 5% reduced rate gives 5/105, or one twenty-first.

UK rates at a glance

The UK has used a 20% standard rate since 4 January 2011. A reduced rate of 5% applies to domestic fuel and power, children's car seats and mobility aids for older people, and a zero rate covers most food, books, newspapers and children's clothing. Zero-rated is a real VAT category, not an exemption — a zero-rated sale still counts toward the £90,000 registration threshold, whereas an exempt sale does not and also blocks the seller from reclaiming input VAT on related costs.

Standard rates across the EU

Every EU member state sets its own standard rate, subject to the 15% floor written into the VAT Directive. No member actually sits on that floor — the lowest standard rate in the union is Luxembourg's 17%.

Most countries also run one or two reduced rates for food, medicine, books and hotel stays, so check the category before assuming the standard rate applies.

Outside the VAT world

The United States has no VAT; state and local sales taxes are added at the register on top of the advertised price. Canada layers a 5% federal GST with provincial taxes, merged into a single Harmonized Sales Tax in five provinces: 13% in Ontario, 14% in Nova Scotia since April 2025, and 15% in New Brunswick, Newfoundland and Labrador, and Prince Edward Island. Australia charges a flat 10% GST, running since 1 July 2000, that like VAT is included in displayed prices. The same add and remove arithmetic works for all of them — set the rate and pick a direction.

Rates change with budgets and category rules are full of edge cases, so confirm the current rate with your tax authority before invoicing. See the site disclaimer.

Frequently asked questions

How do I remove 20% VAT from a price?

Divide the gross figure by 1.20. A price of 250 that already includes 20% VAT breaks down into 208.33 net and 41.67 of VAT. Subtracting 20% instead would give 200, which overstates the VAT by 8.33 — the percentage was charged on the smaller net figure, not the gross.

What are the current VAT rates in the UK?

The standard rate has been 20% since 4 January 2011. A reduced 5% rate covers domestic fuel and power, children's car seats and a few other categories, and a 0% rate applies to most food, books, newspapers and children's clothing. Zero-rated is not the same as exempt — zero-rated sales still count as taxable turnover.

Is VAT the same as sales tax in the United States?

No. VAT is collected at every stage of the supply chain and is already included in the shelf price across the UK and EU, while US sales tax is added once, at the register, and the advertised price excludes it. The US has no national VAT; state and local sales taxes typically run between 0% and about 10%.

What is a reverse VAT calculation?

It means starting from a VAT-inclusive price and working backwards to the net amount, which is what the remove mode here does. It is not the same as the domestic reverse charge, a UK anti-fraud rule for building and construction services where the customer rather than the supplier accounts for the VAT on the return.