How to Calculate VAT Backwards (Formula and Examples)
Updated October 10, 2026
How to Calculate VAT Backwards (Formula and Examples)
To calculate VAT backwards, divide the VAT-inclusive price by 1 plus the VAT rate. At the UK standard rate of 20%, divide by 1.2. A price of £120 including VAT is £100 before VAT, and the VAT is £20.
Many people make the mistake of taking 20% off the total. That gives the wrong answer (£96 instead of £100). This guide shows the right formula, examples for the UK and Europe, a quick shortcut and the common mistakes to avoid. To skip the maths, use our UK VAT calculator or the Europe VAT calculator.
Last updated: October 2026.
The reverse VAT formula
Price before VAT (net) = VAT-inclusive price (gross) / (1 + VAT rate)
VAT amount = gross price – net price
Write the rate as a decimal. 20% becomes 0.20, so you divide by 1.20. 5% becomes 0.05, so you divide by 1.05.
How to take VAT off a price in 3 steps
- Write the VAT rate as a decimal and add 1 (20% becomes 1.2).
- Divide the total price by that number. This is the price before VAT.
- Subtract it from the total to find the VAT.
Why you cannot just take 20% off
VAT is added to the net price, not the total. So the 20% is 20% of the smaller number. Take £120 as an example:
- Wrong way: £120 x 0.80 = £96. This is too low.
- Right way: £120 / 1.2 = £100. VAT is £20.
You can check it by adding VAT back. £100 x 1.2 = £120.
UK examples at 20% VAT
| Price including VAT | Price before VAT | VAT |
|---|---|---|
| £50 | £41.67 | £8.33 |
| £100 | £83.33 | £16.67 |
| £120 | £100.00 | £20.00 |
| £250 | £208.33 | £41.67 |
| £500 | £416.67 | £83.33 |
| £1,000 | £833.33 | £166.67 |
Example: a laptop costs £1,000 including VAT. Divide by 1.2 to get £833.33 before VAT. The VAT in the price is £166.67.
The quick shortcut: divide by 6
At 20% VAT, the VAT in any gross price is exactly one sixth of it. £120 / 6 = £20. £250 / 6 = £41.67. This is a fast way to find the VAT in your head. Subtract it from the total to get the net price.
At 5% VAT, the VAT is one twenty-first of the gross price (the gross divided by 21). So £105 / 21 = £5.
Reduced and zero VAT rates in the UK
The standard UK rate is 20%, but some goods and services have a reduced rate of 5% or a zero rate of 0%. The method is the same. Only the divisor changes.
Example at 5%: a bill of £105 including VAT is £105 / 1.05 = £100 before VAT, so the VAT is £5. Check GOV.UK to see which rate applies to what you sell or buy.
How to calculate VAT backwards in Europe
Every EU country sets its own VAT rate, so use the rate for the country where the sale is taxed. The formula never changes: divide by (1 + rate).
| Price including VAT | Rate | Price before VAT | VAT |
|---|---|---|---|
| €121 | 21% | €100.00 | €21.00 |
| €250 | 22% | €204.92 | €45.08 |
| €500 | 19% | €420.17 | €79.83 |
| €600 | 20% | €500.00 | €100.00 |
| €1,000 | 23% | €813.01 | €186.99 |
Rates differ by country and by type of goods, and they can change. Always check your national tax authority for the current rate. For quick results, use the Europe VAT calculator, which lets you type any rate.
How to add VAT (the forward calculation)
To go the other way, multiply the net price by 1 plus the rate. £100 x 1.2 = £120. To find only the VAT, multiply the net price by the rate. £100 x 0.20 = £20. Our UK VAT calculator does both directions.
When you need to calculate VAT backwards
- Invoices and receipts: to find the net amount and the VAT you can record.
- Pricing: to see how much you really keep from a price that shows tax.
- Expenses: to separate VAT from the cost of a purchase.
- Comparing prices: to compare a VAT-inclusive consumer price with a net trade price.
Checking your profit after VAT
If you sell goods, your income is the net price, not the total the customer paid, because the VAT goes to the tax authority if you are VAT-registered. A product sold for £120 including VAT earns you £100 before costs. Use the profit margin calculator with the net figure, and the markup calculator to set a price. If you offer sales, the discount calculator helps, and for percentage maths in general there is the percentage calculator.
Common mistakes to avoid
- Subtracting the percentage from the total instead of dividing.
- Using the wrong rate, such as 20% for goods that carry 5% or 0%.
- Rounding too early. Keep the pence or cents until the final answer.
- Mixing gross and net figures in the same calculation.
- Applying the UK rate to a European sale, or the reverse.
What about sales tax in the US?
The US does not have VAT. It uses sales tax, which is added at the till and varies by state and local area. The maths is the same idea. Use the sales tax calculator to add it or remove it from a total.
Frequently asked questions
How do you calculate VAT backwards at 20%?
Divide the VAT-inclusive price by 1.2. The result is the price before VAT. Subtract it from the total to find the VAT.
How do I work out the VAT in a price?
At 20%, divide the total by 6. For example, £120 / 6 = £20 of VAT.
Is taking off 20% the same as removing VAT?
No. Taking 20% off £120 gives £96, but removing 20% VAT gives £100. Always divide by 1.2.
What is the VAT rate in the UK?
The standard rate is 20%, with reduced and zero rates for some goods and services. Check GOV.UK for the current rules.
Does this work for other countries?
Yes. Divide the gross price by 1 plus your country’s VAT rate. Rates vary, so check your tax authority.
This article is for information only and is not tax or accounting advice. VAT rates and rules differ by country and change over time, so check official sources or speak to a qualified adviser.