Business guide

How VAT Works on Selling Prices

Learn how to add and remove VAT correctly and why simply subtracting 20% can be wrong.

Adding VAT

A 20% VAT rate means a £100 net amount becomes £120 gross. The VAT element is £20.

Removing VAT

To remove 20% VAT from a VAT-inclusive price, divide by 1.20. A £120 gross price therefore contains £20 VAT and £100 net. Subtracting 20% from £120 would incorrectly produce £96.

Check the rules that apply

VAT treatment can depend on the product, service and circumstances. Use the calculator for arithmetic, but verify current rates and treatment with HMRC or a qualified adviser when it matters.

ProfitMaths guides provide general educational information, not personalised accounting, tax, legal or financial advice.