The two VAT formulas
Every VAT calculation uses one of two formulas. To add VAT to a net price, multiply by one plus the rate. To remove VAT from a gross price, divide by the same factor.
Gross = Net × (1 + rate ÷ 100)
Net = Gross ÷ (1 + rate ÷ 100)
The VAT amount itself is always the difference: VAT = Gross − Net. Never subtract the percentage directly from the gross price — that is the most common mistake and it gives the wrong net.
Worked example: adding 20% VAT
A laptop costs £500 before tax and the VAT rate is 20%. The gross price is 500 × 1.20 = £600, so the VAT is £100. With a 21% rate instead, the same laptop costs 500 × 1.21 = €605 including €105 of VAT.
Worked example: removing VAT from a price
A quote shows €1,210 including 21% VAT. The net price is 1,210 ÷ 1.21 = €1,000, so the VAT inside the quote is €210. If you had wrongly subtracted 21% from €1,210 you would get €955.90 — €44.10 too low.
Quick reference: common rates
| Net price | At 20% | At 21% | At 19% |
|---|---|---|---|
| 100 | 120.00 | 121.00 | 119.00 |
| 250 | 300.00 | 302.50 | 297.50 |
| 1,000 | 1,200.00 | 1,210.00 | 1,190.00 |