Calculate VAT by adding to a price

(See an example)
Price without VAT VAT% £VAT VAT inclusive
£0.00 0.00% £0.00 £0.00

To remove VAT, click here.

Calculation history
Price without VAT VAT% £VAT VAT inclusive
£0.00 0.00% £0.00 £0.00
How to calculate the VAT amount?

Calculate VAT by adding to a price

To calculate VAT of a product, there are 2 options to do it:

  • The first one is used to know the total VAT to pay.

  • In the second, the price without VAT is calculated.

For example, if you want to buy a mobile phone with a value of £1,000.00 British pound (without VAT), the value of VAT will be calculated as follows:

How to calculate the VAT amount?

Continuing with the previous example of buying the smartphone at 1,000.00 British pound (without VAT included), the next step is to know the value of VAT. To do this, you need to multiply the £1,000.00 of the product price by 0.20, which is the result of dividing 20% (UK VAT) by 100%.

The formula is as follows:

£200.00 of VAT will be paid.

The sum of both numbers (price without VAT + VAT) equals 1,200.00 British pound.

Also read calculate the price without VAT.

Calculate total amount without removing VAT

The most appropriate way to know the total amount without removing VAT is as follows:

In a simple way, it is recommended to divide the percentage of VAT applied by 100%. If the VAT is 20%, the result would be (20% / 100% = 0.20).

To know the price of the product, it is necessary to add 1 to the previous result, resulting in (0.20 + 1 = 1.20).

To conclude, it is necessary to multiply the total price by the number obtained in the previous step.

The result is: Total price including VAT = £1,210.00

What is VAT? Value Added Tax

VAT (Value Added Tax) is a tax that is applied to the sale of goods and services in the United Kingdom. Their collection is indirect, this means that the companies serve as an intermediary between the buyers and the Government.

The United Kingdom has 3 types of VAT, the first is the standard VAT, the second is the reduced VAT and the last is known as a zero rate, which exempts VAT from certain products and services. Each one is explained in detail in the following paragraph:

  • Standard VAT: It is the most used, it is equivalent to 20% and it is applied to most goods and services.
  • Reduced VAT: This rate has a value of 5% that is added to products and services, such as car safety seats for children and electricity for the home.
  • Zero VAT: The products exempt from VAT are: food, books, newspapers and children's clothing, to name a few.

For example, when you buy a product in the supermarket, it includes the total cost of the product plus the corresponding VAT rate (if you are in the UK, 20%). The company that acts as a collector is an intermediary between the end customer and HM Revenue & Customs. In the return that is filed quarterly or annually (depending on the case), the business owner must incorporate the entire VAT collection and submit it to the HMRC.

The Value Added Tax (VAT) is an indirect tax imposed on consumption

This income works as financing for government resources and is different for each country; as appropriate for each of them.

How does VAT work?

To know how VAT works, let's see the procedure:

  1. The taxpayer (client). Their process ends when they pay for a good or service that they purchased from a company. No further action is required as VAT is automatically charged to the product.
  2. The taxable person (company or self-employed). They are the tax collectors and have the obligation to declare it every three months before the corresponding HMRC. Their obligation is more complex and is explained below:
¿Cómo funciona el IVA?

Tax declaration process of a company

IVA Repercutido

The company or freelance collects VAT from its clients when it sells its products and/or services. This VAT is called collected VAT.

IVA Soportado

Otherwise, when the entrepreneur buys and pays for goods and services necessary for their business, they pay VAT. This VAT is called paid VAT.

Quarterly or monthly (depending on each case) you must file the tax return.

They must file the tax return quarterly. With two possible results:

  1. If the difference between the VAT collected is greater than the VAT paid, they must pay to the HMRC.
  2. If the difference between the VAT collected is less than the VAT paid, the HMRC must refund VAT to them.

For example:

A pastry shop owner has charged £50,000.00 in a quarter for her products, plus £10,000.00 of VAT (£50,000.00 * 20% VAT).

While the purchase of material to make the cakes was £20,000.00, plus £4,000.00 of VAT (£20,000.00 * 20%).

The process would be as follows:

  • Subtracting the VAT collected (£10,000.00) minus (-) the VAT paid (- £4,000.00) the result will be £6,000.00 British pound. This figure is what she will pay to HM Revenue & Customs.

  • The expenses she incurs for her main activity (flour, eggs, cake decorating material, etc.) are not paid to the HMRC. These expenses are called "deductible expenses." If in her return she obtains that the VAT paid is greater than the VAT collected, the HM Revenue & Customs will return that money to her.