Orpheus

VAT & Sales Tax Calculator

Add tax to a net price, or strip it out of a gross one.

Inputs
%
The amount is
Price including tax
120.00
Tax
20.00
Net
100.00
Gross
120.00
Tax as share of gross
16.67%
net = gross ÷ (1 + rate) · gross = net × (1 + rate)

Removing 20% tax means dividing by 1.2, not subtracting 20% — that would give the wrong answer.

Every tool runs entirely in your browser. Your files are never uploaded to a server.

To add tax, multiply by one plus the rate. To remove it, divide by one plus the rate — not subtract the percentage. Removing 20 percent VAT means dividing by 1.2, which is a 16.67 percent reduction.

How to use VAT Calculator

  1. Enter the amount. Either the price before tax or the price you were charged.
  2. Set the rate. Twenty percent is the UK standard rate; rates vary widely by country and category.
  3. Choose the direction. Add tax to a net figure, or work backwards from a gross one.

About calculating VAT

The direction of a tax calculation is where nearly all the errors live. Adding is intuitive: a rate applies to a net figure and increases it. Removing is not, because people reach for subtraction. If a gross price includes 20 percent tax, the tax is a sixth of the gross rather than a fifth, because the fifth was calculated on the smaller net amount. Dividing by 1.2 gives the net; subtracting 20 percent gives a number that is wrong by four percent of the total and appears constantly on hand-made invoices. Beyond arithmetic, the design of the two main systems differs in ways that matter for anyone invoicing internationally. VAT is collected at each stage of the supply chain, with registered businesses reclaiming the tax they paid on inputs, so the burden ultimately falls once on the final consumer. Sales tax in the United States is collected only at the last sale, which is why business-to-business purchases there are often exempt with a resale certificate. Rates vary not just by country but by product category, and the category boundaries are notoriously arbitrary — the litigation over whether particular snack foods count as biscuits or cakes exists precisely because the two are taxed differently.

Frequently asked questions

How do I remove 20% VAT from a price?
Divide by 1.2, do not subtract 20 percent. A gross price of 120 has a net of 100 and 20 of tax. Subtracting 20 percent would give 96, which is wrong by four — the tax was charged on the smaller number, not the larger one.
What is the difference between VAT and sales tax?
VAT is charged at every stage of production with businesses reclaiming what they paid, so only the final consumer bears it. US sales tax is charged once, at the final sale. The arithmetic here works for both; the administration differs entirely.
Why is tax 16.67 percent of the gross when the rate is 20 percent?
Because the rate is applied to the net figure, and the gross is larger. Twenty of tax on a net 100 is 20 percent of the net but a sixth of the 120 gross. Both statements describe the same transaction.
Are all goods taxed at the same rate?
No. Most VAT systems have reduced or zero rates for categories such as food, books, children’s clothing and energy, and the boundaries are famously arbitrary. Check the category rate rather than assuming the standard one.

Last updated