How to Calculate VAT Backwards (Remove VAT From a Gross Price)
Working backwards from a VAT-inclusive price to the net amount and the tax itself — the formula, common mistakes, and worked examples for 20%, 10% and more.
If you’ve ever stared at a receipt trying to figure out how much of the total was actually tax, you’ve run into one of the most common everyday math problems: extracting VAT from a price that already includes it.
Why you can’t just “take off 20%”
This is the mistake almost everyone makes first. If the price includes 20% VAT, the tax is not 20% of the total — it’s 20% of the net price, which is a smaller number.
Say a meal costs $120 including 20% VAT. The correct breakdown:
- Net price: $100
- VAT: $20
- Gross (what you paid): $120
If you “take off 20%” from $120, you get $96 — wrong on both counts. The gross is 120% of the net, not 100% plus 20% separately. The tax share of the gross is 20/120 ≈ 16.67%, not 20%.
The backwards formula
To remove VAT at rate r (as a percentage) from a gross price G:
Net = G ÷ (1 + r/100)
VAT = G − Net
Worked examples:
| Gross price | VAT rate | Net | VAT |
|---|---|---|---|
| $120 | 20% | $100.00 | $20.00 |
| $115 | 15% | $100.00 | $15.00 |
| $110 | 10% | $100.00 | $10.00 |
| £1,200 | 20% | £1,000.00 | £200.00 |
The net is always the gross divided by (1 + the rate). Everything else follows.
The forward direction, for completeness
Adding VAT is the reverse: multiply the net by (1 + r/100). A $500 invoice at 10% VAT becomes $500 × 1.10 = $550. Both directions are two keystrokes on any calculator — the danger is only in mixing them up.
A real-world use: freelance invoices and tax returns
Two situations where this comes up constantly:
- Freelancers quoting “plus VAT.” If a client pays you $1,200 gross at 20% VAT, only $1,000 is your revenue — the $200 is tax you’ll owe to the revenue authority. Budgeting your actual income means stripping the VAT out first.
- VAT returns. Most VAT schemes ask you to report net sales, net purchases and the VAT on each. Extracting the tax from receipts (instead of trusting the printed line) is a good habit — misprinted receipts are more common than you’d think.
Quick sanity check
The VAT fraction trick: for 20% VAT, the tax is exactly 1/6 of the gross (20/120). For 5% VAT it’s 1/21, and for 10% it’s 1/11. If a receipt’s tax line doesn’t match these fractions of the total, question it.
Do it in one step
The VAT Calculator handles both directions at any rate — type a gross price to extract the tax, or a net price to add it. It includes preset rates for the UK, Germany, Netherlands, Singapore and Australia, or you can enter any custom rate.