VAT (Value Added Tax) is an indirect consumption tax collected by businesses on behalf of the government. To calculate VAT, you only need two things: an amount (net or gross) and the applicable rate.
The two essential formulas
Adding VAT (net → gross)
Gross price = Net price × (1 + rate)
Example: £100 net × 1.20 = £120 gross (20% rate)
Removing VAT (gross → net)
Net price = Gross price / (1 + rate)
Example: £120 gross ÷ 1.20 = £100 net · VAT = £120 − £100 = £20
UK VAT rates (2025)
| Rate | Category | Examples |
|---|---|---|
| 20% | Standard rate | Most goods and services |
| 5% | Reduced rate | Domestic fuel, child car seats |
| 0% | Zero rate | Food, children's clothing, books |
EU VAT rates at a glance
| Country | Standard rate | Reduced rate |
|---|---|---|
| France | 20% | 10% / 5.5% |
| Germany | 19% | 7% |
| Spain | 21% | 10% / 4% |
| Italy | 22% | 10% / 5% |
| Netherlands | 21% | 9% |