How do I remove VAT from a price?

Divide by one plus the rate. At 20%, divide the VAT-inclusive figure by 1.2. Do not multiply the inclusive figure by 20% — that gives a larger number than the VAT actually charged.

Why is 20% VAT only 16.67% of the total?

Because the 20% is charged on the net price, and the total is 120% of that net. The VAT is therefore 20 parts out of 120, which is 16.67% of what the customer paid.

Should margin be calculated on the gross or net price?

Net, always. VAT is collected on behalf of the tax authority and passed on. Counting it as revenue inflates your top line and makes your margin look worse than it is once you divide by the larger figure.

Does this work for sales tax?

The add and remove arithmetic is the same for any percentage tax applied to a price. The wider mechanics differ — US sales tax is charged once at the final sale rather than reclaimed through the chain — so the margin logic transfers but the compliance model does not.

Does anything I type get sent anywhere?

No. The whole calculation runs in your browser. Nothing is transmitted, stored, or logged, and there is no account to create.

VAT Reverse & Margin Impact

Strip VAT out or add it in — then see what a rate change does to your margin.

Replaces: Accountant queries and one-line web calculators that stop at the arithmetic

How to use it

Tell the calculator whether your figure already includes VAT or not, and it produces the other two. Add what the item costs you and it also shows what happens to your margin if the rate changes and you keep your price where it is.

Where the number comes from

To add VAT: multiply the net by the rate and add it on.
To remove VAT: divide the gross by one plus the rate. The VAT is the difference.
As a share of the gross price, VAT is rate ÷ (1 + rate) — at 20% that is 16.67%, not 20%.
Gross margin is measured on the net price, because the VAT was never your money.
Holding the shelf price through a rate rise means the gross stays fixed while more of it is tax, so the net falls and the margin falls with it.
The price needed to hold margin is your original net multiplied by one plus the new rate.

What goes wrong

The part most calculators leave out.

Rates vary by product and by country, and reduced or zero rates apply to whole categories — food, books, children's clothing, medical supplies. A single rate across a mixed basket will be wrong.
Registration thresholds, reverse charge, and place-of-supply rules for cross-border and digital sales all change who accounts for the tax. None of that is modelled here.
This calculates VAT on a price, not your VAT liability. What you owe is output tax less recoverable input tax, and the second half is not in this calculation at all.
Some costs carry irrecoverable VAT, which makes the real cost higher than the net figure entered here.
The margin analysis assumes you can neither raise your price nor renegotiate your cost. In practice a rate change usually moves both, over time.
This is arithmetic, not tax advice. Rates, categories and rules change, and a mistake in VAT is one the authority will find.

The 20% that is 16.67%

An invoice totals 1,200 including VAT at 20%. The instinct is to take 20% of 1,200 and call the VAT 240, leaving 960 net. That is wrong in a way that costs money: the correct figure is 1,200 ÷ 1.2 = 1,000 net, with 200 of VAT. The error overstates the tax by 40 and understates the revenue by the same amount on every single invoice. On an item costing 620, the true margin is 38% on net revenue of 1,000. Using the wrong method it looks like 35.4% on 960 — a business making decisions on a margin it does not have.

Questions

How do I remove VAT from a price?: Divide by one plus the rate. At 20%, divide the VAT-inclusive figure by 1.2. Do not multiply the inclusive figure by 20% — that gives a larger number than the VAT actually charged.
Why is 20% VAT only 16.67% of the total?: Because the 20% is charged on the net price, and the total is 120% of that net. The VAT is therefore 20 parts out of 120, which is 16.67% of what the customer paid.
Should margin be calculated on the gross or net price?: Net, always. VAT is collected on behalf of the tax authority and passed on. Counting it as revenue inflates your top line and makes your margin look worse than it is once you divide by the larger figure.
Does this work for sales tax?: The add and remove arithmetic is the same for any percentage tax applied to a price. The wider mechanics differ — US sales tax is charged once at the final sale rather than reclaimed through the chain — so the margin logic transfers but the compliance model does not.
Does anything I type get sent anywhere?: No. The whole calculation runs in your browser. Nothing is transmitted, stored, or logged, and there is no account to create.

Last updated 15 August 2026.

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