How to remove VAT from a gross price
TL;DR, the essentials
- To remove 20% VAT from a gross price, divide by 1.20 to get the net amount: Net = Gross / 1.20.
- The VAT itself is the difference, or more quickly VAT = Gross / 6 at the 20% rate (the “VAT fraction” of 1/6).
- The divisor depends on the rate: 1.20 for 20%, 1.05 for 5%. A 0% (zero-rated) supply carries no VAT to remove.
- Common error: taking 20% of the gross price. VAT is charged on the net amount, never on the gross total.
You have a gross price in front of you, a receipt, a shelf price, a supplier invoice, and you need to pull out the VAT or the net amount underneath it. This is the reverse of normal invoicing, and it trips a lot of people up. This guide walks through how to remove VAT from a gross price, with the exact formula per rate, worked examples and a cheat sheet. The figures use UK VAT rates as the reference. Rates and rules vary from one country to another, so always check the rate in force where you trade.
Net, VAT and gross: the principle
Three amounts sit on any VAT invoice. The net (or ex-VAT) figure is the base price the seller sets. The VAT is added on top. The gross (or VAT-inclusive) figure is the sum of the two, which is what the customer actually pays. The relationship is simple:
Gross = Net + VAT • Gross = Net x (1 + rate)
When you start from the net price you move forward: you add the tax on top. When you start from the gross price you work backwards: you first strip out the tax already baked in to recover the net figure, then read off the VAT. That division by the factor (1 + rate) is the whole trick.
Identify the rate
20%, 5% or 0% in the UK, depending on what is being supplied. The rate sets the divisor.
Recover the net
Divide the gross by the factor (1.20 at the standard rate) to get the net amount.
Isolate the VAT
The VAT is the gap: VAT = Gross − Net, or directly Gross / 1.20 x 0.20.
In one sentence
Removing VAT from a gross price means dividing back down to the net amount by the factor, then taking the difference between the two.
The formula, step by step
Take a gross amount of £1,200 at the standard rate of 20%. The factor is 1.20 (that is 1 + 0.20). You work like this:
- Net amount = 1,200 / 1.20 = £1,000
- VAT amount = 1,200 − 1,000 = £200
You can also get the VAT in a single step, without spelling out the net figure:
VAT = Gross / (1 + rate) x rate = Gross / 1.20 x 0.20
Check: 1,200 / 1.20 x 0.20 = 1,000 x 0.20 = £200. Both methods give the same result, so use whichever reads more naturally to you.
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Removing 20% VAT from a gross price
The standard rate of 20% applies to most goods and services in the UK. It is by far the most common case, and there is a handy shortcut. Because 0.20 / 1.20 = 1/6, the 20% VAT contained in a gross price is exactly:
VAT (at 20%) = Gross / 6
This ratio is often called the VAT fraction. Worked examples:
- Invoice of £120 gross: VAT = 120 / 6 = £20, so net = £100.
- Bill of £60 gross: VAT = 60 / 6 = £10, so net = £50.
- Purchase of £959.88 gross: VAT = 959.88 / 6 = £159.98, so net = £799.90.
Quick quiz
How much VAT is contained in a £300 gross price at the standard 20% rate?
What about the 5% and 0% rates?
The method does not change, only the factor adapts to the rate that applies. The UK uses three VAT rates, and it is the nature of the goods or service that decides which one you use.
| Rate | Factor | Typical examples (UK) |
|---|---|---|
| 20% (standard) | 1.20 | Most goods and services (the default) |
| 5% (reduced) | 1.05 | Domestic fuel and power, children’s car seats, some home energy-saving materials |
| 0% (zero-rated) | 1.00 | Most food, books and newspapers, children’s clothing |
Applying VAT = Gross / factor x rate on a rebuilt net base of £100:
- £120 gross at 20%: net = 120 / 1.20 = £100, VAT = £20.
- £105 gross at 5%: net = 105 / 1.05 = £100, VAT = £5.
- £100 gross at 0%: net = £100, VAT = £0 (nothing to remove).
Rates shown are the UK VAT rates in force in 2026 (source: HMRC / GOV.UK). Rates, thresholds and the list of items in each band differ by country, and can change. If you are unsure which rate applies to your supply, check GOV.UK or ask your accountant.
The formula cheat sheet
Here is everything you need to move from a gross amount to the net and the VAT, whatever the rate. Each result is shown on a gross price that contains £100 of net value.
| Rate | Net from gross | VAT from gross | Example (£100 net) |
|---|---|---|---|
| 20% | Gross / 1.20 | Gross / 1.20 x 0.20 | £120 gross → net £100 · VAT £20 |
| 5% | Gross / 1.05 | Gross / 1.05 x 0.05 | £105 gross → net £100 · VAT £5 |
| 0% | Gross (unchanged) | £0 | £100 gross → net £100 · VAT £0 |
Memory hook: at the standard rate, the VAT inside a gross price is exactly one sixth of it (Gross / 6), and the net is the remaining five sixths.
The classic mistake: taking the rate off the gross
The most common error is to multiply the gross amount by the rate to “find” the VAT. It is wrong, and the result is always too high.
Why 1,200 x 0.20 does not give the right VAT
1,200 x 0.20 = £240, whereas the actual VAT included is £200. Tax is calculated on the net amount, not on the gross: you must always come back down to the net (divide by the factor) before applying the rate, or use the formula Gross / 1.20 x 0.20.
Another thing to watch: a single invoice can mix rates (for example zero-rated food alongside a standard-rated service). In that case the VAT is worked out line by line at each item’s own rate, never in one lump on the gross total.
Good habit
On a VAT invoice you receive, the net / VAT / gross breakdown is usually shown already. Before you recalculate, check it is not printed there: the seller is required to state the VAT charged.
Should you remove VAT by hand?
For a one-off receipt, these formulas are plenty. But as volume climbs, juggling several rates, handling deposits, credit notes and preparing a VAT return becomes a source of errors. A proper invoicing tool applies the right rate automatically, splits net, VAT and gross on every line, and pulls together your VAT figures without any re-keying.
It matters even more where digital tax reporting is mandatory. In the UK, for instance, Making Tax Digital for VAT requires most VAT-registered businesses to keep digital records and file returns through compatible software (source: GOV.UK). Rules of this kind differ by country, so check what applies to you, but the direction of travel is clear: software that gets the VAT split right, and files it for you, saves both time and mistakes.
Automate the VAT split
Our selection gathers the tools that separate net and gross, handle multiple rates and file compliant VAT returns.
The next step
Need a tool? See our best invoicing software 2026 comparison, or browse the invoicing hub for the full picture on quotes, invoices and VAT.
Frequently asked questions
How do I remove 20% VAT from a gross price?
Divide the gross price by 1.20 to get the net amount, then subtract: on £1,200 gross, net = £1,000 and VAT = £200. Even quicker, at the standard rate the VAT included is exactly the gross divided by 6 (1,200 / 6 = 200).
How do I work out the net amount from a gross price?
Divide the gross by the factor for the rate: 1.20 for 20%, 1.05 for 5%. A zero-rated (0%) supply carries no VAT, so its gross and net are the same. Example: £105 gross at 5% gives 105 / 1.05 = £100 net.
Why can’t I just take 20% off the gross price?
Because VAT is charged on the net amount, not on the gross. Multiplying the gross by 0.20 overstates the tax (£240 instead of £200 on £1,200 gross). You must first divide by 1.20 to reach the net, or use the formula Gross / 1.20 x 0.20.
What is the VAT fraction?
The VAT fraction is the ratio that gives the VAT inside a gross price in a single step. At the 20% standard rate it is 1/6, so VAT = Gross / 6. For a 5% rate the fraction is 1/21 (VAT = Gross / 21). It comes from rate divided by (1 + rate).
How do I remove VAT when an invoice mixes rates?
Work line by line, bringing each item down to its own net figure at its own rate, never in one calculation on the gross total. A VAT invoice should already break down the net, VAT and gross by rate, so check that before recalculating anything.