Working Out VAT

Updated on June 6, 2022

Do you want to figure out how much VAT you owe? I’ll do my best to explain it. Then we’ll look at the math. First, let me explain Gross and Nett.

VAT is included in the gross price. Also known as “VAT included.”

VAT is not included in the Nett price. Also known as “Net” or “Ex VAT.”

Work out your ratio

In order to perform these calculations, a ratio is multiplied or divided (also called the VAT fraction). The first step is to determine your current ratio. Fortunately, working out is a piece of cake. Subtract 1 from your VAT rate and multiply it by 100. A 20% rate, for example, yields a 1.20:1 ratio (20/100 = 0.2 + 1 = 1.2)

So here’s a rule of thumb: just put “1.” in front of the VAT rate, so 20% becomes 1.20, 17.5 percent becomes 1.175, and 5% becomes 1.05

The ratio is 1.20 if you are in the United Kingdom and use a VAT rate of 20%. Because the ratio is one-and-a-half in Germany, the rate is equal to 1.23.

Adding VAT

Adding VAT to an amount is very easy. In order to calculate your Nett amount, you just multiply your ratio.

Suppose you’re selling a chair for £150 Nett and you need to add 20% VAT to the gross price to include VAT.

To get 180, multiply 150 by 1.2

Including VAT, the total cost is $180.

Removing VAT

VAT is as simple as subtracting it from a number (provided you have a calculator, I’m horrible at division). Your gross amount is divided by your ratio.

For example, if you paid £180 for a table and wanted to figure out the Nett price excluding VAT, you would do the following:

150 – 180 = 1.20

In this case, the net sum, excluding VAT, is $150.

Finding the VAT amount from a Gross amount

Occasionally, you’ll need to figure out how much VAT is included in a total Gross Revenue. Simply subtract the Nett amount (see Removing VAT above) from the Gross to get the Nett value.

Using our table as an example, if you paid £180 for a table and wanted to know how much VAT was included in the purchase, you would do the following:

150 – 180 = 1.20

after that

Thirty is the difference between 180 and 150

As a result, there is a VAT charge of £30 here.

Having learned about VAT, you can now calculate it. Our VAT Calculator is simple to use, and I’m confident you’ll agree.