Add VAT vs Remove VAT — What's the Difference?
Adding VAT means calculating the tax on top of a net (ex-VAT) price. Removing VAT means extracting the tax already included in a gross (inc-VAT) price. The formulas are different: adding multiplies by the rate, removing divides by 1 + the rate.
Whether you're quoting a price to a customer or working backwards from a receipt, understanding the difference between adding and removing VAT is essential. This page explains both methods with the standard UK rate of 20%.
What each option means
Add VAT
Start with a net amount (excluding VAT) and calculate the gross total. Formula: Net × 1.20 = Gross. Example: £100 × 1.20 = £120.
Remove VAT
Start with a gross amount (including VAT) and work out the net amount and VAT portion. Formula: Gross ÷ 1.20 = Net. Example: £120 ÷ 1.20 = £100 net, £20 VAT.
Key differences
| Aspect | Add VAT | Remove VAT |
|---|---|---|
| Starting point | Net amount (excl. VAT) | Gross amount (incl. VAT) |
| Formula (20% rate) | Net × 1.20 | Gross ÷ 1.20 |
| Common use | Quoting prices, creating invoices | Checking receipts, reclaiming VAT |
| VAT amount from £100 | £100 net → £20 VAT → £120 gross | £100 gross → £16.67 VAT → £83.33 net |
Best for
Add VAT when…
You know the price before tax and need to calculate the total a customer will pay, or you're creating a VAT invoice.
Remove VAT when…
You have a total price that includes VAT and need to find the VAT amount — for example, when reclaiming input VAT or checking a supplier invoice.
Assumptions and caveats
- Examples use the standard UK VAT rate of 20%
- Reduced (5%) and zero (0%) rates apply to some goods and services
- VAT treatment varies — always confirm the correct rate for your goods or services
- This is a general explanation, not VAT advice