UK Value Added Tax (VAT) Calculator

What is Value Added Tax (VAT)?

Value Added Tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. In the UK, VAT is applied to most goods and services, with some exceptions and different rates for certain items.

The VAT Formula

The formula for calculating VAT depends on whether you're adding VAT to a net amount or removing VAT from a gross amount:

Adding VAT:

\[VAT Amount = Net Amount \times VAT Rate\] \[Gross Amount = Net Amount + VAT Amount\]

Removing VAT:

\[Net Amount = \frac{Gross Amount}{1 + VAT Rate}\] \[VAT Amount = Gross Amount - Net Amount\]

Where:

• Net Amount: The price before VAT
• VAT Amount: The amount of VAT
• Gross Amount: The total price including VAT
• VAT Rate: The applicable VAT rate (e.g., 0.20 for 20%)

Step-by-Step VAT Calculation

1. Determine whether you're adding VAT or removing VAT from a price.
2. Identify the correct VAT rate (standard, reduced, or zero).
3. Apply the appropriate formula:
   • For adding VAT: Calculate VAT amount, then add to net amount.
   • For removing VAT: Divide gross amount by (1 + VAT rate), then subtract from gross amount.
4. Round the results to the desired precision (usually two decimal places).

Example Calculation

Let's calculate the VAT for a product with a net price of £100, using the standard UK VAT rate of 20%:

1. VAT Amount: \(100 \times 0.20 = £20\)
2. Gross Amount: \(100 + 20 = £120\)

Visual Representation

The blue portion of the bar represents the VAT amount (£20) relative to the gross amount (£120).