Business
VAT Calculator
Works VAT, which a registered business collects and reclaims rather than bears.
Result
Reduced and zero rates apply to some construction and energy-efficiency work in several countries. Confirm the correct rate for the specific job before invoicing.
Get a Free Business AuditHow the calculation works
Tax charged on sales at the applicable rate, offset against tax paid on purchases, with the difference remitted. Extracting tax from an inclusive price is a division rather than a subtraction of the rate, which is the arithmetic most commonly got wrong.
What moves the number
- Whether the price is tax-inclusive or exclusive.
- The applicable rate, which varies by country and category.
- Input tax on purchases, which offsets output tax.
- Registration status and threshold.
Where this one goes wrong
At a 20% rate the tax inside an inclusive price of 120 is 20 rather than 24, because the 20% was applied to 100, and treating the extraction as a subtraction of the rate overstates the tax every time. Divide rather than subtract. For a registered business the collected tax is held and remitted rather than earned, which makes it a cash flow item, and spending it before the remittance date is a problem that recurs quarterly.
Before you quote
- Extract tax from an inclusive price by division, not subtraction.
- Be explicit about whether a price includes tax.
- Hold collected tax rather than treating it as revenue.
Questions
About this calculator
How do I remove VAT from an inclusive price?
By division rather than by subtracting the rate. At 20%, the tax inside a price of 120 is 20 and not 24, because the rate was applied to the 100 net. Subtracting the rate from the gross overstates the tax every time.
Is VAT a cost to a registered business?
Generally not, since tax paid on purchases offsets tax collected on sales and only the difference is remitted. It is a cash flow item though, and money collected and spent before the remittance date has to be found again.
Does the United States have VAT?
No. The US uses state and local sales tax, charged at the final sale rather than offset through the supply chain, with rules set by state and locality. VAT systems operate in most other countries with nationally set rates and thresholds.
The formula
net = gross ÷ (1 + VAT rate)
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How to use this calculator
- Amount ($). Enter your own figure; the page starts at $2,400.
- VAT rate (%). Enter your own figure; the page starts at 20%.
- Direction. Enter your own figure; the page starts at Add VAT (amount is net).
The result updates as you type, so you can try a figure, see what it does to gross (vat inclusive), and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Amount | $2,400 |
| VAT rate | 20% |
| Direction | Add VAT (amount is net) |
What comes out
| Result | Value |
|---|---|
| Gross (VAT inclusive) main result | $2,880.00 |
| Net (VAT exclusive) | $2,400.00 |
| VAT amount | $480.00 |
| Reverse VAT divisor | 1.2 |
Net $2,400.00 plus 20% VAT of $480.00 gives a gross of $2,880.00. To reverse it, divide the gross by 1.2.
How sensitive the answer is
Holding everything else steady and changing only amount, this is what happens to gross (vat inclusive). It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Amount ($) | Gross (VAT inclusive) |
|---|---|
| $1,200 | $1,440.00 |
| $1,800 | $2,160.00 |
| $2,400 example above | $2,880.00 |
| $3,600 | $4,320.00 |
| $4,800 | $5,760.00 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Amount ($)
- A money amount, starting at $2,400.
- VAT rate (%)
- A percentage, between 0 and 50, starting at 20%.
- Direction
- Choose from Add VAT (amount is net), Remove VAT (amount is gross).
What the results tell you
| Result | What it is |
|---|---|
| Gross (VAT inclusive) | The headline result. A money figure. |
| Net (VAT exclusive) | A money figure. |
| VAT amount | A money figure. |
| Reverse VAT divisor | A number. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
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