VAT formulas
At 20%, VAT is 1/6 (16.67%) of a VAT-inclusive price — so £120 contains £20 of VAT. Simply taking 20% off £120 would give the wrong answer (£96).
What is VAT?
Value-added tax is a consumption tax charged at each stage of production and sale. Businesses charge VAT on their sales (output tax) and reclaim the VAT they paid on purchases (input tax), so the full burden falls on the final consumer. More than 170 countries use VAT or a similar goods and services tax (GST). The United States uses state sales taxes instead.
Reduced and zero rates
The rates in the calculator are standard rates. Many countries apply reduced rates to food, books, children’s clothing, public transport or energy, and zero-rate exports. Check the rules for the specific product.
Related International Tax & Business Tools
Navigating Value Added Tax across domestic and international transactions ensures exact price compliance. Calculate state and local retail taxes with our Sales Tax Calculator, convert foreign currencies using real-time mid-market rates with the Currency Converter, track commercial operating margins via the Business Profit Calculator, and calculate merchant transaction fees with our PayPal Fee Calculator.
Frequently asked questions
How do I calculate 20% VAT?
Multiply the net price by 1.2 to get the gross price. To find the VAT in a gross price, divide by 6 (or multiply by 0.2 ÷ 1.2).
Do I need to register for VAT?
Businesses must register once taxable sales exceed the country's threshold — for example £90,000 a year in the UK. Below it, registration is optional.
Is VAT the same as sales tax?
Both are paid by consumers, but sales tax is collected once at the final sale, while VAT is collected in stages throughout the supply chain.