VAT & Sales Tax Calculator
Add tax to a net price or strip it out of a gross one — including the reverse calculation that invoices and expense claims need.
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The mistake that costs freelancers money
To remove tax from a gross price you divide, you don't subtract a percentage.
A £120 invoice including 20% VAT breaks down as £100 net and £20 tax. Divide 120 by 1.2. If instead you take 20% off £120 you get £96, and you'll under-declare the net by £4 on every line. The reason is that the 20% was calculated on £100, not on £120.
The general rule: net = gross ÷ (1 + rate/100).
VAT fractions worth knowing
To find the tax already inside a gross price, multiply by the VAT fraction —
rate ÷ (100 + rate):
| Rate | Fraction | Divide gross by | Tax on 120 |
|---|---|---|---|
| 5% | 1/21 | 1.05 | 5.71 |
| 10% | 1/11 | 1.10 | 10.91 |
| 15% | 3/23 | 1.15 | 15.65 |
| 20% | 1/6 | 1.20 | 20.00 |
| 21% | 21/121 | 1.21 | 20.83 |
| 23% | 23/123 | 1.23 | 22.44 |
The 20% case is the one to memorise: divide by six to get the VAT out of any gross figure.
VAT and sales tax are not the same thing
VAT is charged at every stage of production. Each business charges it on sales, reclaims it on purchases, and remits the difference. Consumer prices are normally displayed inclusive, which is why a European price tag is what you actually pay.
US sales tax is charged once, at the final retail sale, and is usually added at the register. Rates combine state, county and city, so two shops a few miles apart can charge differently. The shelf price is the net figure.
Practically: in the UK and EU you'll mostly be removing tax from gross prices; in the US you'll mostly be adding it to net ones.
Getting invoices right
A compliant VAT invoice generally needs to show, at minimum:
- Your VAT registration number
- A unique sequential invoice number and the date
- The net amount per line, and the rate applied
- The total VAT charged, usually broken out by rate
- The gross total
Round at the total, not on each line — rounding every line independently drifts by a penny or two and won't reconcile. Most tax authorities specify their preferred method, so check if you're invoicing at volume.
Cross-border sales
For digital services sold to consumers in the EU and UK, VAT is generally due at the customer's rate, not yours, which means tracking rates across many countries. Schemes like the EU's One Stop Shop exist to make this manageable. Business-to-business sales often shift the liability to the buyer under the reverse charge.
General information about how the arithmetic works, not tax advice. Rates and rules change and vary by jurisdiction — confirm with your tax authority or accountant.
Frequently asked questions
How do I remove VAT from a gross price?
Divide, do not subtract. At 20% VAT, divide the gross by 1.2. So £120 gross is £100 net and £20 VAT. Taking 20% off £120 gives £96, which is wrong — the 20% was calculated on the smaller net figure, not the gross.
What is the VAT fraction?
A shortcut for finding the tax inside a gross price. At 20% it is 1/6, so VAT on £120 is £20. At 5% it is 1/21, at 23% it is 23/123. Generally the fraction is rate ÷ (100 + rate), which is what this tool applies.
Is VAT the same as sales tax?
Not quite. VAT is charged at each stage of production with businesses reclaiming what they paid, and displayed prices usually include it. US sales tax is charged once at the final sale and is typically added at the register, so the shelf price is the net one. The arithmetic here works for both — just pick the right direction.
Which rate applies to my sale?
It depends on the goods and the jurisdiction, and there are many reduced and zero rates — children's clothes, books, food and energy are common exceptions. For cross-border digital sales the rate is usually the customer's, not yours. Check the current rate with your tax authority rather than relying on a remembered figure.
Can I reclaim VAT on business expenses?
If you are VAT-registered, generally yes on legitimate business purchases, provided you hold a valid VAT invoice. Rules on partial exemption, entertainment and mixed personal use are genuinely complicated. Talk to an accountant rather than guessing.