What is the VAT?
Value Added Tax is a consumption tax charged at each stage of supply, with businesses reclaiming the VAT they pay on inputs. Standard rates vary widely: 20% in the UK, 19% Germany, 20% France, 21% Netherlands, 25% Denmark and Sweden.
The most common error is removing VAT by subtracting the percentage. To extract VAT from a gross price you must divide, not subtract.
Formula & worked example
Removing VAT: Net = Gross / (1 + rate)
VAT = Gross − Net
Worked example: a £1,000 net price at 20% VAT gives £200 of VAT and a £1,200 gross price. Going the other way, £1,200 gross ÷ 1.20 = £1,000 net. Subtracting 20% from £1,200 would wrongly give £960 — an error of £40.
How to use this vat calculator
- Enter the amount you have.
- Set the VAT rate for the relevant country.
- Choose whether the amount already includes VAT or not.
- The breakdown shows net, VAT and gross for invoicing.
Smart tips
- To remove VAT at 20%, divide by 1.2 — never subtract 20%, which gives a different and incorrect answer.
- The UK VAT registration threshold is £90,000 of taxable turnover in a rolling 12-month period.
- Reduced rates apply to some goods: 5% in the UK for domestic energy, 0% for most food and children's clothing.
- B2B sales within the EU often use the reverse charge, so no VAT is charged on the invoice.
- Registered businesses reclaim input VAT, so VAT is only a real cost to the end consumer.
Frequently asked questions
How do I remove VAT from a price?
Divide the gross price by (1 + rate/100). At 20%, divide by 1.2. Subtracting 20% gives the wrong answer.
What is the UK VAT rate?
20% standard, 5% reduced for items such as domestic energy, and 0% for most food, books and children's clothing.
When must I register for VAT?
In the UK, once taxable turnover exceeds £90,000 in any rolling 12-month period, or immediately if you expect to exceed it in 30 days.
Is VAT the same as sales tax?
No. VAT is charged at every stage with businesses reclaiming input tax. US sales tax is charged only once, at the final retail sale.
Want the theory behind the numbers? Browse the Money Blog for worked guides.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 8 Sep 2026. How we check these numbers.