VAT Calculator

Although VAT calculators are often employed by businesses to add VAT to the sales price of an item, customers can also benefit from calculating VAT for a number of reasons – usually to calculate the net price of a certain product or service.

There is, of course, a mathematical formula which can be applied but plugging a few figures into a small online form to calculate VAT is so much simpler and quicker.

What is VAT?

Value Added Tax (VAT) is a percentage that is charged on most goods and services in the UK that are provided by a VAT-registered business. It can also be charged on items that are imported from countries outside of the EU that are then subsequently imported into the UK through other European countries.

Currently, the VAT rate is at 20%; not the 17.5% rate that was used in previous years. If you are not careful to change the percentage to the current year, your total will be skewed and you may be left with inaccurate finances.

How to Calculate VAT

Even though the average online VAT calculator took this into consideration, many users don’t understand that they can simply change the percentage and the VAT calculations will work just fine with the new percentages. For instance if you were to plug in a £100 item with 20% added VAT, you would come up with £120 for the item.

That’s pretty straightforward, but an online VAT calculator can also provide the reverse when you are looking for what an item cost before tax was included. With the same item, let’s say you paid £100 which already included VAT. That was your gross payment, net prior to 20% VAT would be £80.

Before and After VAT

The above is an example of how to calculate VAT backwards.

On a £200 item, you would calculate VAT by taking the gross amount and dividing by 1.2. That would give you the amount of £166.66, pre-VAT.

Although the calculation is fairly simple with rounded numbers, trying to figure out how to find VAT backwards might necessitate the need of a VAT reverse calculator. You would plug in the gross figure of £100 and then the VAT rate of 20% and your figure would be £16.67 as what you are paying in VAT and the item’s net cost would be £83.33.

Unless you work with figures on a daily basis, it is sometimes easier to find a VAT calculator than it is to learn how to calculate VAT. Even so, it does help to have an understanding of the process so you can get a ‘quick’ idea when pricing in stores, or for a next order you intend to make if you are a merchant.

Asking yourself ‘How do I calculate VAT?’ might be easier asking where to find an online VAT calculator, but if in a pinch you get stuck. Just remember the following information. The best way to learn how to calculate VAT at 20%, assuming the net value of the product is £100 is:

1.20 x £100 = £120

That’s pretty straightforward, right? Ok, now if you know the price of the item with VAT included, in this case £120 then the reverse operation will get you back to the net price. Your calculation would look like this:

£120 / 1.20 = £100

Again, as you can see, those are fairly simple figures to work around, but if you are talking about an item that is £1,876.99 you would almost certainly need to use an online VAT calculator.