How VAT is worked out
Adding VAT: multiply the net price by the rate. At 20%, VAT on 1,000 is 1,000 × 0.20 = 200, so the gross price is 1,200.
Removing VAT: divide the gross price by 1 plus the rate. At 20%, 1,200 ÷ 1.20 = 1,000 net, and the VAT is 200. A common mistake is taking 20% off 1,200, which gives 960 and is wrong.
VAT on your invoices
If you are VAT registered, a VAT invoice shows the net amount, the VAT rate, the VAT amount and the total. The UK invoice template and EU VAT invoice do this for you, including the reverse charge note for business clients abroad.
Questions
How do I add 20% VAT?
Multiply the price by 1.2. For example 250 × 1.2 = 300, which is 250 plus 50 VAT.
How do I remove 20% VAT from a price?
Divide the price by 1.2. For example 300 ÷ 1.2 = 250 net, and the VAT is 50.
What are the UK VAT rates?
Standard 20%, reduced 5% and zero rate 0%. Some goods and services are exempt.
Is the result rounded?
Yes, to 2 decimal places, the way amounts appear on an invoice.