How to Calculate VAT (and Why Removing 20% From £120 Gives You £100, Not £96)

The problem: removing VAT is not subtraction

You have a £120 receipt that says "VAT included at 20%." You want the pre-VAT amount. You reach for the obvious: 20% of £120 is £24, so the net is £96. That's wrong. The real net is £100, and the VAT is £20 — not £24. The error is small enough to look like rounding, large enough to bankrupt a bookkeeping run at scale. The reason is that the 20% was never 20% of £120; it was 20% of £100, added on top. Removing it requires division, not subtraction, and almost everyone gets this wrong the first time.

Fastest path

Open the VAT Calculator, pick your country, pick Add or Remove, type the amount.

UK 20%, Add VAT — input:  £100.00 net
→ VAT:   £20.00
→ Gross: £120.00

UK 20%, Remove VAT — input: £120.00 gross
→ Net:   £100.00
→ VAT:   £20.00

Same £20 of VAT in both directions — that's the sanity check. If your "remove VAT" result gives a different VAT amount than "add VAT" would on the same numbers, the formula is wrong. The rest of this guide is why the formulas differ, which country rate to pick, and the three rate bands that exist inside most countries.

The substance: two formulas, and they are not mirrors

Adding VAT (net → gross)

This one is intuitive. VAT is a percentage of the net amount.

vat   = net × (rate / 100)
gross = net + vat

£100 net at 20%: vat = £20, gross = £120. The gross is net × 1.20. This is the same math as a markup or a tip — you're adding a percentage of the base to the base.

Removing VAT (gross → net)

This is where it breaks. The gross already contains the VAT, so the VAT is 20% of the net, not 20% of the gross. You have to divide the gross by (1 + rate/100) to recover the net:

net = gross / (1 + rate/100)
vat = gross − net

£120 gross at 20%: net = 120 / 1.20 = £100, vat = £120 − £100 = £20. The wrong approach — gross × (1 − rate/100) = 120 × 0.80 = £96 — subtracts 20% of the gross, which is £24, not the VAT. That formula is for a discount, not for extracting an included tax. The two operations look similar and produce different numbers, and the difference is exactly the rounding error that compounds across a 200-line invoice.

The sanity check

For any VAT calculation, the VAT amount should be the same whether you add or remove. If adding 20% to £100 gives £20 of VAT, removing 20% from £120 must also give £20 of VAT. If it doesn't, you've used the wrong formula. The tool does this correctly; spreadsheets and mental math often don't.

The three rate bands

Most countries don't have one VAT rate; they have three. The tool exposes them as the Standard / Reduced / Zero toggle.

Standard — the default rate on most goods and services. UK 20%, Germany 19%, France 20%, Sweden 25%.
Reduced — applies to essentials: food, books, children's clothes, domestic fuel, medicine. UK 5%, Germany 7%, France 5.5%, Ireland 13.5%.
Zero — the good is VAT-rated but at 0%, so no VAT is charged and the business can still reclaim input VAT. UK zero-rates children's clothing, most food, books. Zero is not the same as exempt — exempt goods (insurance, postal services) don't allow input VAT reclaim.

The band you pick changes the calculation. A £100 children's outfit in the UK is zero-rated: £100 net, £0 VAT, £100 gross. The same £100 as an adult outfit is standard-rated: £120 gross. Getting the band wrong on a return is how businesses end up owing HMRC for undercharged VAT.

The country presets

The tool ships 18 country presets plus a custom rate:

Region	Country	Standard	Reduced
UK	United Kingdom	20%	5%
EU	Germany	19%	7%
EU	France	20%	5.5%
EU	Spain	21%	10%
EU	Italy	22%	10%
EU	Netherlands	21%	9%
EU	Poland	23%	8%
EU	Sweden	25%	12%
EU	Ireland	23%	13.5%
EU	Portugal	23%	13%
Other	Norway	25%	15%
Other	Switzerland	7.7%	2.5%
Other	Canada (GST)	5%	—
Other	Australia (GST)	10%	—
Other	New Zealand (GST)	15%	—
Other	Japan	10%	8%
Other	Singapore (GST)	9%	—
Other	UAE	5%	—

Rates are as of the tool's last update (April 2026). Countries change them — Singapore raised GST from 8% to 9% in 2024, Switzerland periodically adjusts. For a filing, confirm the rate that was in force on the supply date, not the current rate.

Note that Canada, Australia, NZ, Singapore, and UAE call it GST (Goods and Services Tax), not VAT. The math is identical — it's a single-stage consumption tax included in the gross — but the paperwork and the name differ. The tool handles both under the same formulas.

Gotchas

Removing VAT is division, not subtraction. gross / 1.20 gives the net; gross × 0.80 gives the wrong answer. The two differ by exactly rate² / 10000 of the gross — small per line, large across an invoice.
Zero-rated is not the same as exempt. Zero-rated goods (UK children's clothes, most food) are VAT-rated at 0% — the business reclaims input VAT. Exempt goods (insurance, finance, postal) are outside VAT entirely — no input reclaim. The tool's "Zero" band is for zero-rated, not exempt.
Some countries have multiple reduced rates. The tool stores one reduced rate per country. France actually has 5.5% and 10% and 2.1% reduced rates for different categories; Italy has 4%, 5%, and 10%. If your good falls under a non-default reduced rate, use the Custom rate option.
Canada has provincial sales tax on top of GST. The 5% GST is federal; most provinces add their own PST (BC 7%, SK 6%) or harmonize into HST (Ontario 13%, Nova Scotia 15%). The tool calculates GST only — add provincial tax separately or use the custom rate for HST.
Switzerland's rate is unusually low. 7.7% standard, 2.5% reduced — the lowest in Europe. Don't assume 20% across the continent.
The rate in force on the supply date is what counts. If you're calculating VAT for a return covering Q1 2024, use the Q1 2024 rate, not today's. Rates change mid-year and mid-quarter in some jurisdictions.
Bulk mode applies one rate to every line. If your invoice mixes standard and reduced goods, split it into two bulk runs — one at standard, one at reduced — and combine the CSVs. The tool doesn't support per-line rates.
VAT-inclusive vs VAT-exclusive pricing. B2B prices in the EU are usually quoted net (VAT added at invoice); B2C prices are usually quoted gross (VAT included). Know which one you're looking at before you pick Add or Remove.

Summary

Adding VAT: vat = net × (rate/100), gross = net + vat. Same as a markup.
Removing VAT: net = gross / (1 + rate/100), vat = gross − net. Division, not subtraction. Removing 20% from £120 gives £100, not £96 — the 20% was 20% of the net, not 20% of the gross.
The sanity check: the VAT amount must be the same in both directions. Add 20% to £100 → £20 VAT; remove 20% from £120 → £20 VAT. If they differ, the formula is wrong.
Three rate bands: standard (most goods), reduced (essentials), zero (zero-rated goods like UK food and children's clothes — not the same as exempt). Pick the band for the good, not the country's headline rate.
18 country presets plus a custom rate. GST and VAT use the same math; Canada/Australia/NZ/Singapore/UAE call it GST. Confirm the rate in force on the supply date for actual filings.
Calculate VAT at the VAT Calculator; for the general percentage case use Percentage Calculator, for the inverse (discount = same divide-by-(1−rate) trap) use Discount Calculator, and for the add-a-percentage case use Tip Calculator.

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