How much vat is on a price, and how much vat do you pay once the rate and the direction of the calculation are settled

How much VAT depends on two things: the rate that applies to the supply, and whether the figure you are starting from already includes VAT. Getting the rate wrong is a question about what you are buying or selling. Getting the direction wrong is pure arithmetic, and it is the more common of the two errors by a long way.

The rates

The standard rate is 20% and applies to most goods and services. The reduced rate is 5% and applies to some, such as children's car seats and home energy. The zero rate is 0% and applies to zero-rated goods and services such as most food and children's clothes. Some things are exempt from VAT entirely, such as postage stamps and financial and property transactions, and exempt is not the same as zero-rated: the difference matters for what you can reclaim.

Adding VAT to a net figure

Multiply. At the standard rate the VAT is 20% of the net, so £100.00 net becomes £20.00 of VAT and £120.00 gross. At the reduced rate, £100.00 net becomes £5.00 of VAT and £105.00 gross. This is the direction most trade invoices work in, because a trade price is normally quoted excluding VAT and the tax is added below the line. If the figure you were given is described as plus VAT, this is the sum you want.

Taking VAT out of a gross figure

Divide, and this is where the money is lost. At the standard rate the VAT is a sixth of the gross, not a fifth: £120.00 gross contains £20.00 of VAT and £100.00 net. Taking 20% of £120.00 gives £24.00, which is wrong by £4.00 on every line it touches. At the reduced rate the VAT is a twenty-first of the gross. A retail receipt is almost always gross, so this is the direction most receipts need, and it is what the calculator on this site does by default.

Questions people ask about how much vat

How much VAT is on £100?

If the £100 is net, £20.00 at the standard rate, making £120.00 gross. If the £100 already includes VAT, £16.67, leaving £83.33 net.

Why is VAT on a gross figure not 20%?

Because the 20% was charged on the net. A £120.00 gross is £100.00 plus £20.00, so the VAT is a sixth of the gross rather than a fifth of it.

What are the current UK VAT rates?

20% standard on most goods and services, 5% reduced on some such as children's car seats and home energy, and 0% zero rate on zero-rated goods and services such as most food and children's clothes.

Sources

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