How UK VAT works: adding and removing 20%

Net means the amount before VAT. Gross means the amount including VAT. To add VAT: gross = net × (1 + rate). At the standard 20% rate, £100 net becomes £100 × 1.20 = £120 gross. The VAT portion is £20.

You can also calculate the tax first: VAT = net × 0.20, then add it on. Both routes should match. If they do not, a rounding setting on an invoice is usually the cause — businesses often round to the nearest penny per line.

Use add-VAT when you have a supplier’s ex-VAT quote and need the customer-facing total, or when you are pricing work and want to show tax separately.

To find the net amount inside a VAT-inclusive price, divide by (1 + rate). At 20%, net = gross ÷ 1.20. So £120 inclusive is £100 net, and VAT is £20.

A common shortcut is “divide by 6” for 20% VAT: £120 ÷ 6 = £20 tax. That only works at 20%. At 5% you would divide by 1.05 instead. Do not use the divide-by-6 trick on reduced-rate goods.

Use remove-VAT when a receipt shows only the total, or when you need the ex-VAT cost for bookkeeping. Keep the original document — software estimates are not a substitute for a valid VAT invoice.

The UK standard rate is 20% for most goods and services. Some items use a reduced rate (often 5%), some are zero-rated (taxable at 0%, still in the VAT system), and some are exempt (outside VAT in a different way). Food, children’s clothes, and energy can sit in special categories — the rules are detailed and change.

Utiio lets you type any rate so you can model a scenario. It does not look up whether your product is reduced or exempt. If you are unsure, check GOV.UK VAT rates or ask an accountant before you print a quote.

US sales tax is a different system: it is usually added at the till and varies by state and city. You can model a rate in the same calculator for a rough comparison, but it is not a filing tool.

A proper VAT invoice typically shows the net, the rate, the VAT amount, and the gross. If you only have a round number, reversing 20% is a reasonable planning step, not proof of the tax charged.

Margin analysis is usually done on ex-VAT figures. Pair the VAT Calculator with the Profit Margin Calculator if you are setting a selling price and then adding tax for the customer.

Confirm filings, VAT registration thresholds, and reclaimable input tax with HMRC or a qualified professional. The calculator is for quotes and checks, not for submitting a VAT return.