How to calculate VAT?

Following these simple steps can help you to calculate VAT amount and price including/excluding VAT manually on calculator.
add vat calculation

Adding VAT Formula

If you want to add VAT to original figure, to divide the amount by 100 and then multiply by (100 + VAT percentage). That's all, you got inclusive of VAT value (Gross amount).


Add VAT

Price plus VAT calculation

For example, we will calculate VAT at a standard UK VAT rate of 20. If your business sells goods and services for £500

  1. First, you need to divide the amount by 100 per cent
  2. Then multiply this value by 120 per cent
  3. After the calculation, we get £600, which is the price including VAT


We will calculate VAT at a reduced VAT rate of 5. If your business sells goods and services for £1000

  1. First, you need to divide the price excluding VAT by 100 percentage
  2. Then multiply this value by 105 percentage
  3. We get gross amount £1050 - the price VAT inclusive
  4. It turns out that the VAT amount is £50

revers vat calculation

Removing VAT Formula

If you want to subtract VAT from a figure (to make a reverse VAT calculation), to divide the amount by (100 + VAT percentage) and then multiply by 100. Now you know the amount exclusive of VAT (Net amount).


Remove VAT

Price minus VAT calculation

For example, we will calculate VAT at a standard UK VAT rate of 20. If your business sells goods and services for £500

  1. First, you need to divide the gross price by 120 per cent
  2. Then multiply the value obtained by 100 per cent
  3. We get £416.67, which is the price excluding VAT


We will calculate VAT at a reduced VAT rate of 5. If your business sells goods and services for £1000

  1. First, you need to divide the price including VAT by 105 percentage
  2. Then multiply the value obtained by 100 percentage
  3. We get net amount £952.38 - the price without VAT
  4. Accordingly, the VAT amount is £47.62

how to calculate VAT in excel
excel

Calculate VAT in Excel

If you need to calculate VAT for several goods at once, it is easier to use Excel than a our VAT calculator. I created a Excel spreadsheet – download, it's free.

Download spreadsheet

A simplified example of the VAT process

The following is an explanation of the VAT applied to coffee sold by a coffee shop owner in a store that contains coffee beans roasted by a nearby roaster with beans grown by a local farmer. Assume that the VAT is 20%. Each person or business involved in the chain must complete the government's VAT paperwork.
farmer

Fresh coffee beans first come from the local farmer. If the roaster pays a total of £5 per pound of fresh coffee beans, a VAT of £1 (£5 x 20%) is added to this cost, so that the farmer receives a total of: £6 for each pound of coffee beans from the roaster.

coffee bean

The roaster roasts the coffee beans and charges the coffee shop owner £10 per pound of roasted coffee beans. This means that the shopkeeper has to pay a total of £12 per pound, £10 for the roasted coffee beans and 20% VAT, which is £2. However, since the farmer has already paid the first £1 to the HMRC, the roaster only has to pay the government £1 in VAT.

coffee maker

A coffee shop owner can use each pound of roasted coffee beans to sell 5 cups of coffee at £4 each for a total of £20. For every 5 cups of coffee sold, the store owner receives a total of £24 from customers who bought his coffee, £20 and £4 VAT. However, since a total of £2 in VAT has already been paid to the state by the farmer and the roaster, the shopkeeper pays only £2 to the HMRC.

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Antony Kidless
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