How to Calculate VAT: A Step-by-Step Guide

VAT calculations are a fundamental part of business accounting. This guide will show you how to calculate VAT correctly in different scenarios.

Basic VAT Calculation Formula

To add VAT to a net amount:

• Multiply the net amount by the VAT rate (e.g., 20% = 0.20)
• Add the result to the original amount

Examples

Adding VAT

• Net amount: £100
• VAT at 20%: £100 × 0.20 = £20
• Gross amount: £100 + £20 = £120

Removing VAT

To find the net amount from a gross price:

• Divide the gross amount by 1.20 (for 20% VAT)