How to Calculate VAT: Add and Remove VAT Formulas (20%, 5%)

Quick answer: To calculate VAT, multiply the net price by the rate: at 20%, 100 x 0.20 = 20 VAT, so the total is 120. To remove VAT, divide the gross by 1 plus the rate: 120 / 1.20 = 100 net. At the UAE's 5% rate, multiply by 0.05 to add VAT and divide by 1.05 to remove it.

Knowing how to calculate VAT correctly is the difference between an invoice your client accepts and one that comes back for correction. The maths is simple once you have the right formula for the job: adding VAT to a net price, extracting VAT from a gross price, or totting up a mixed-rate invoice. This guide covers all three with real numbers for the UK, the UAE and the EU. If you would rather skip the arithmetic, our free invoice generator calculates VAT on every line automatically.

Note: This is general information, not tax advice. Which rate applies to a supply, and how to round, depends on local law.

The two VAT formulas you need

Every VAT calculation starts from one of two places: a net price (before VAT) or a gross price (VAT-inclusive). Write the rate as a decimal: 20% = 0.20, 5% = 0.05, 19% = 0.19.

You know	You want	Formula	Example at 20%
Net price	VAT amount	VAT = net x rate	250 x 0.20 = 50
Net price	Gross price	Gross = net x (1 + rate)	250 x 1.20 = 300
Gross price	Net price	Net = gross / (1 + rate)	300 / 1.20 = 250
Gross price	VAT amount	VAT = gross x rate / (1 + rate)	300 x 0.20 / 1.20 = 50

The last row is often called the VAT fraction. Expressed in percentages it is rate / (100 + rate), so for 20% VAT it is 20/120, which is exactly one sixth.

How to add VAT to a price

1. Confirm the rate that applies to the item (standard, reduced or zero).
2. Convert the rate to a decimal by dividing by 100.
3. Multiply the net price by the decimal to get the VAT.
4. Round the VAT to two decimal places (or the smallest currency unit).
5. Add VAT to the net to get the amount the customer pays.

Example: a consultant bills 1,450 net at 20%. VAT = 1,450 x 0.20 = 290. Total = 1,450 + 290 = 1,740.

How to remove VAT from a gross price (reverse VAT)

This is the calculation most people get wrong. If a receipt says 240 including 20% VAT, the VAT is not 20% of 240 (48). The 20% was charged on the net amount, so you divide:

• Net = 240 / 1.20 = 200
• VAT = 240 - 200 = 40
• Check with the fraction: 240 x 1/6 = 40

Taking 20% off 240 would give 192, which understates the net price by 8. The same logic applies to US-style sales tax; see our guide to reverse sales tax calculation and the sibling post on how to calculate sales tax.

Handy VAT fractions

VAT rate	Multiply net by	Divide gross by	VAT fraction of gross
5% (UAE, UK reduced)	1.05	1.05	5/105 = 1/21
15% (EU minimum standard)	1.15	1.15	15/115 = 3/23
19% (Germany)	1.19	1.19	19/119
20% (UK, France)	1.20	1.20	20/120 = 1/6
21% (Spain, Netherlands)	1.21	1.21	21/121
23% (Ireland)	1.23	1.23	23/123

VAT rates you are most likely to use in 2026

Rates change, so always confirm with the tax authority, but as of 2026:

• United Kingdom: standard 20%, reduced 5% (for example home energy and children's car seats) and zero 0% (most food and children's clothing), according to GOV.UK VAT rates.
• United Arab Emirates: a single standard rate of 5%, with zero-rating for items such as many exports. See our UAE VAT registration guide for when you must start charging it.
• European Union: each country sets its own rates, but the EU's Your Europe VAT page confirms the standard rate cannot be below 15%. Examples include Luxembourg 17%, Germany 19%, France 20%, Spain and the Netherlands 21%, Italy 22%, Ireland 23% and Hungary 27%.

Some countries call the same tax GST or consumption tax; our explainer on sales tax vs VAT vs GST covers the differences. Japan's 10% and 8% rates, for example, come with their own invoice rules, explained in our guide to the Japan qualified invoice system.

Worked example: a mixed-rate UK invoice

A UK retailer sells three items to a business customer on one invoice. Each line has a different VAT rate.

Item	Net	Rate	VAT	Gross
Installation consultancy	1,200.00	20%	240.00	1,440.00
Children's car seat	150.00	5%	7.50	157.50
Printed books	80.00	0%	0.00	80.00
Total	1,430.00		247.50	1,677.50

Check the arithmetic: net 1,200 + 150 + 80 = 1,430. VAT 240 + 7.50 + 0 = 247.50. Gross 1,430 + 247.50 = 1,677.50. A proper VAT invoice shows the VAT for each rate separately, not just a single blended figure.

Worked example: removing 5% UAE VAT

A Dubai supplier quotes AED 8,400 including VAT. Net = 8,400 / 1.05 = 8,000. VAT = 8,400 - 8,000 = 400. Check: 8,400 x 1/21 = 400.

Worked example: 19% German VAT

A Berlin client receives an invoice for EUR 1,190 gross. Net = 1,190 / 1.19 = 1,000. VAT = 190. If you sell to EU consumers from another member state, the rate is usually the customer's country rate, not yours, so confirm which one applies before you calculate.

Discounts, shipping and rounding

Discounts come before VAT

VAT is charged on what the customer actually pays. A 1,000 net service with a 10% discount is 900 net, VAT at 20% is 180 and the total is 1,080. Calculating VAT on 1,000 and then discounting gives the wrong answer. Show the discount as its own line so the customer can follow the calculation.

Delivery charges follow the goods

In many VAT systems, delivery charged with goods takes the same VAT treatment as the goods. Add shipping as its own line with the matching rate.

Rounding

Round VAT to the smallest currency unit. HMRC lets UK businesses round per line or on the invoice total, as long as the method is consistent. If you round each line, the total VAT may differ by a penny from rounding once at the end. Pick one method and use it every time.

How to calculate the VAT you owe on a return

Your VAT return is simply output VAT minus input VAT for the period. Use the VAT figures shown on your invoices and your suppliers' invoices, not a recalculation from turnover, so the return matches your records line by line.

• Output VAT on sales: 24,000 net at 20% = 4,800
• Input VAT on reclaimable purchases: 6,750 net at 20% = 1,350
• VAT payable: 4,800 - 1,350 = 3,450

If input VAT is bigger than output VAT, you are due a refund. UK businesses can follow our guide on how to file a VAT return in the UK. Special schemes, such as the UK Flat Rate Scheme, use a different calculation based on a percentage of gross turnover, so check whether one applies to you.

Practical tips: spreadsheets, quotes and cross-border sales

How to calculate VAT in Excel or Google Sheets

If you keep prices in a spreadsheet, a few formulas do all the work. Put the net price in column A and the VAT rate as a percentage in column B (for example 20% or 5%):

• VAT amount: =ROUND(A2*B2,2)
• Gross price: =A2+ROUND(A2*B2,2)
• Net from gross (gross in column C): =ROUND(C2/(1+B2),2)
• VAT inside a gross price: =C2-ROUND(C2/(1+B2),2)

Wrapping each result in ROUND stops tiny fractions of a penny from piling up across hundreds of rows. If your rates are stored as whole numbers (20 rather than 20%), divide by 100 inside the formula. For a full spreadsheet workflow, see our guide on how to make an invoice in Excel.

Quoting prices with or without VAT

Once you know how to calculate VAT, the next decision is how to show it. The general rule of thumb:

Customer type	Usual way to quote	Reason
VAT-registered businesses	Net price "plus VAT"	They reclaim the VAT, so the net figure is their real cost
Consumers	Gross price including VAT	Consumer protection rules in many countries require the full price to be shown
Mixed customer base	Show both clearly	Avoids disputes about whether VAT was included

If a quote does not say whether VAT is included, a customer may argue the price was VAT-inclusive, leaving you to absorb the tax. On a 1,200 quote at 20%, that is the difference between receiving 1,200 net and receiving only 1,000 net with 200 going to the tax authority. Always write "plus VAT" or "including VAT" on quotes, estimates and invoices.

VAT on cross-border invoices

Cross-border sales are where the "how much VAT" question often becomes "whose VAT". When a business in one country supplies services to a VAT-registered business in another, the customer often accounts for the VAT under the reverse charge, and the supplier's invoice shows 0 VAT with a reverse charge note. Exports of goods are commonly zero-rated with proof of export. In both cases your calculation is easy, because the VAT on the invoice is zero, but the wording and the evidence matter.

Exchange rates add one more step. Many countries require the VAT amount to be shown in local currency even when the invoice is in another one. If a UK business bills a UK customer USD 5,000 plus 20% VAT, the VAT is USD 1,000, and at an illustrative rate of 0.78 GBP per USD it would also be shown as GBP 780.00 on the invoice. Use the rate your tax authority accepts for the invoice date, and note which rate you used so the figure can be checked later.

Common VAT calculation mistakes

• Taking the rate off a gross price instead of dividing by 1 plus the rate.
• Applying VAT to exempt or zero-rated lines. Our guide to zero-rated vs exempt VAT explains the difference.
• Charging VAT when you are not registered. Below the threshold (for example the UK VAT registration threshold), you must not add VAT.
• Charging VAT to a foreign business customer when the reverse charge applies.
• Mixing rounding methods across invoices, which makes reconciliations painful.
• Using the wrong currency. Many countries require the VAT amount in local currency even when you invoice in another.

Calculate VAT automatically on your next invoice

Learning how to calculate VAT comes down to two moves: multiply net by (1 + rate) to add it, divide gross by (1 + rate) to remove it, then show each rate separately on your invoice. To check a single figure quickly, try our tax calculator. To produce the finished document, open the invoice generator, set your VAT rate per line, and download a clean PDF, or start from the minimal invoice template or our UK invoice generator.