VAT Calculator
Results:
Net Amount: 0.00
VAT Amount: 0.00
Gross Amount: 0.00
Understanding VAT: The Value Added Tax
Value Added Tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. It is ultimately borne by the end consumer, but it is collected by businesses at each step of the process.
How VAT Works
Imagine a product moving through different stages:
- Manufacturer: Sells a product to a wholesaler for £100 (net). If the VAT rate is 20%, they charge the wholesaler £20 VAT, making the gross price £120. The manufacturer then remits the £20 to the government.
- Wholesaler: Sells the product to a retailer. They might add value (e.g., storage, distribution). If they sell it for £150 (net), they charge the retailer £30 VAT (20% of £150), making the gross price £180. The wholesaler then remits £10 to the government (£30 collected minus £20 paid to the manufacturer).
- Retailer: Sells the product to the end consumer. If they sell it for £200 (net), they charge the consumer £40 VAT (20% of £200), making the gross price £240. The retailer then remits £10 to the government (£40 collected minus £30 paid to the wholesaler).
In this chain, the total VAT collected by the government is £20 + £10 + £10 = £40, which is exactly 20% of the final net price of £200 paid by the consumer.
Key Terms:
- Net Amount: The price of a good or service before VAT is added.
- VAT Amount: The specific monetary value of the tax applied.
- Gross Amount: The total price of a good or service, including VAT. This is what the end consumer typically pays.
- VAT Rate: The percentage at which VAT is charged. This varies significantly by country and sometimes by product category within a country (e.g., standard rate, reduced rate, zero rate). Common standard rates include 20% in the UK, 19% in Germany, and 21% in Spain.
Why Use a VAT Calculator?
A VAT calculator is an essential tool for:
- Businesses: To accurately price products, calculate VAT payable to tax authorities, and understand their input and output VAT.
- Consumers: To understand how much tax they are paying on purchases, especially for large items or services where VAT might be a significant component of the total cost.
- Accountants and Bookkeepers: For quick verification of VAT calculations and financial reporting.
How to Use This Calculator:
Our VAT Calculator offers two primary modes of operation:
- Add VAT (Amount is Net): If you have a price before VAT (Net Amount) and want to find out the VAT amount and the total price (Gross Amount), enter your Net Amount and the VAT Rate, then select "Add VAT".
- Remove VAT (Amount is Gross): If you have a total price that already includes VAT (Gross Amount) and want to determine the original price before tax (Net Amount) and the VAT component, enter your Gross Amount and the VAT Rate, then select "Remove VAT".
Example Scenarios:
Example 1: Adding VAT
You are a business selling a product for £150 (Net Amount) and the standard VAT rate is 20%.
- Enter "150" in 'Amount'.
- Enter "20" in 'VAT Rate (%)'.
- Select "Add VAT (Amount is Net)".
- Click "Calculate VAT".
- Result: Net Amount: £150.00, VAT Amount: £30.00, Gross Amount: £180.00.
Example 2: Removing VAT
You bought an item for £120 (Gross Amount) and you know the VAT rate applied was 20%. You want to find out the price before VAT.
- Enter "120" in 'Amount'.
- Enter "20" in 'VAT Rate (%)'.
- Select "Remove VAT (Amount is Gross)".
- Click "Calculate VAT".
- Result: Net Amount: £100.00, VAT Amount: £20.00, Gross Amount: £120.00.