How to add VAT to a price (net to gross)
TL;DR, the essentials
- The net price excludes VAT, the gross price includes it, and VAT is the difference between the two.
- To add VAT at the UK standard rate: gross = net × 1.20. To work back: net = gross ÷ 1.20.
- The multiplier depends on your rate. The UK standard rate is 20%, but VAT rates differ from one country to another, so always check the rate that applies to you.
On a quote, an invoice or a receipt, two figures keep coming up: the net amount and the gross amount. The gap between them is the VAT (value added tax). This guide shows you exactly how to add VAT to a price, how to work backwards from a gross figure to find the net, and how the arithmetic changes with the rate, with a worked example for each. The worked figures use the UK standard rate of 20%, but the method is the same wherever you trade, only the percentage changes.
Net, VAT and gross: what is the difference?
These three terms describe the same product or service at three different price levels.
- Net price (excluding VAT): the sale price before any tax is added. It is the base figure, the one businesses quote to each other and the one that feeds your turnover.
- VAT (value added tax): an indirect tax on consumption. If you are VAT registered you collect it on behalf of the tax authority and then pay it over. It is never income for you.
- Gross price (including VAT): the final amount the customer actually pays, that is the net price plus the VAT.
The relationship is simple: gross = net + VAT. Everything else is just a way of calculating one of the three when you know the other two.
In one sentence
The net price is your real revenue, the gross price is what the customer pays, and the VAT in between simply passes through your account on its way to the tax authority.
How do you add VAT to a price?
This is the most common calculation: you have set a price before tax and you want to show the final, VAT-inclusive figure. You simply multiply the net amount by a multiplier that depends on the VAT rate.
Find the rate that applies
It depends on the goods or service and on the country. In the UK the default is 20%, with reduced (5%) and zero (0%) rates for specific items.
Turn the rate into a multiplier
Add 1 to the rate expressed as a decimal: 1.20 for 20%, 1.05 for 5%, and 1.00 for 0%.
Multiply the net price
gross = net × multiplier. A job priced at £1,000 net at the standard rate gives 1,000 × 1.20 = £1,200 gross.
gross = net × (1 + VAT rate)
At the UK standard rate of 20%, the multiplier is 1.20. A consultant billing a project at £1,000 net therefore gets:
- VAT = 1,000 × 0.20 = £200
- Gross = 1,000 × 1.20 = £1,200
The principle is identical for any other rate, only the multiplier changes: × 1.05 for a 5% rate, or × 1.00 (no change) for a zero rate.
Let the software do the maths
The tools we tested apply the right rate and calculate the gross figure with no rounding errors.
How do you work back from gross to net?
The reverse calculation is just as useful: a receipt, a shelf price or a supplier invoice gives you the gross figure, and you need to isolate the net amount (for your bookkeeping) or the VAT portion (to reclaim it, if you are registered). This time you divide the gross figure by the same multiplier.
net = gross ÷ (1 + VAT rate)
For a £120 gross amount at 20%:
- Net = 120 ÷ 1.20 = £100
- VAT = 120 − 100 = £20
You can also pull the VAT straight out of the gross figure without finding the net first. At 20%, the VAT equals gross × 20 ÷ 120, that is a multiplier of about 0.1667 (often called the VAT fraction, 1/6). On £120 gross: 120 × 0.1667 ≈ £20. The same logic applies to other rates: for 5%, the VAT fraction is 5 ÷ 105, roughly 0.0476.
What are the VAT rates?
VAT rates are set nationally, so there is no single figure that applies everywhere. The UK, for example, uses three main rates, and neighbouring countries use different percentages entirely. Always confirm the rate for the country and the type of supply you are dealing with.
- Standard rate (UK: 20%): applies by default to most goods and services, including most software and professional services.
- Reduced rate (UK: 5%): applies to specific items such as domestic energy, children’s car seats and certain home energy-saving materials.
- Zero rate (UK: 0%): applies to things like most food, children’s clothing and books. These sales are still VATable, just at 0%, which is not the same as being exempt.
UK rates shown for illustration, source: gov.uk. VAT rates and rules differ in every country, and reduced or zero rates cover different items depending on where you trade. Check your national tax authority for the rate that applies to you.
Do not assume 20%
The 20% figure used throughout this guide is the UK standard rate. Many countries use a different standard rate, and reduced rates vary widely. If you invoice customers abroad, confirm the correct rate before you calculate.
Quick quiz
A service priced at £200 net at the 20% standard rate. What is the gross?
A worked example for each rate
Let us start from a £100 net base to see how each UK rate affects the final price.
- 20%: a consulting service at £100 net → VAT £20 → £120 gross.
- 5%: a qualifying energy-saving installation at £100 net → VAT £5 → £105 gross.
- 0%: a zero-rated book at £100 net → VAT £0 → £100 gross.
Working the other way, if a business receives a £105 gross invoice for a 5%-rated supply, it finds the net like this: 105 ÷ 1.05 = £100 net, of which £5 is VAT that a registered business could reclaim.
Ready to automate your VAT?
Our comparison ranks the invoicing tools that apply the right rate and file your return cleanly.
Net to gross conversion table
For a quick reference, here are the gross amounts you get from some common net figures, at three UK rates.
| Net amount | + 20% | + 5% | + 0% |
|---|---|---|---|
| £10 | £12.00 | £10.50 | £10.00 |
| £50 | £60.00 | £52.50 | £50.00 |
| £100 | £120.00 | £105.00 | £100.00 |
| £500 | £600.00 | £525.00 | £500.00 |
| £1,000 | £1,200.00 | £1,050.00 | £1,000.00 |
To work back from gross to net: divide by 1.20 (20%), by 1.05 (5%), or by 1.00 (0%). Swap in your own country’s rate where it differs.
What if I am not VAT registered?
Not every business charges VAT. Below the VAT registration threshold, a small business does not add VAT to its prices at all, so its net price equals its gross price. In the UK, registration becomes compulsory once your taxable turnover passes £90,000 over a rolling 12-month period, and you can also register voluntarily below that. Once you are registered, you charge VAT and the formulas above apply.
Good habit
Even below the threshold, track your rolling 12-month turnover month by month. Crossing the registration line can make you liable for VAT quickly, and the threshold amount differs from one country to another.
UK registration threshold of £90,000, source: gov.uk (accessed July 2026). Thresholds vary by country, and some countries have no threshold at all.
Should you calculate VAT by hand in 2026?
Technically you can, but for day-to-day bookkeeping it is not worth the risk. The arithmetic is easy on one line, but errors creep in with mixed rates, rounding on multi-line invoices, credit notes and reverse-charge situations on cross-border sales. A invoicing tool applies the correct rate, calculates the gross figure, handles credit notes and prepares your VAT return without rounding slips.
Watch the rounding rules
Tax authorities set specific rules on how VAT is rounded per line and per invoice. Good software applies these automatically, which is one less thing to get wrong at scale.
To compare tools that calculate VAT correctly and keep your records tidy, see our roundup of the best invoicing software in 2026.
Next step
Ready to automate your invoices and your VAT? Read our comparison of the best invoicing software 2026, or browse the invoicing hub for more guides.
Frequently asked questions
How do you add VAT to a price?
Multiply the net amount by 1 plus the VAT rate. At the UK standard rate of 20%, gross = net × 1.20. For example, £1,000 net becomes £1,200 gross, of which £200 is VAT. Rates vary by country, so use your local rate.
How do you work back from gross to net?
Divide the gross amount by the rate multiplier. At 20%, net = gross ÷ 1.20. So £120 gross equals £100 net plus £20 VAT.
How do you calculate the VAT from a gross amount?
At 20%, the VAT equals gross × 20 ÷ 120, roughly gross × 0.1667 (the 1/6 VAT fraction). On £120 gross, the VAT is £20. For other rates, replace 120 with 105 (5%) or use the matching fraction.
Is VAT always 20%?
No. 20% is the UK standard rate. Countries set their own VAT rates, and reduced or zero rates apply to specific goods and services. Always confirm the correct rate for your country and the type of supply before you calculate.