How VAT is added and removed
Add VAT: total = price × (1 + rate ÷ 100)
Remove VAT: price before VAT = total ÷ (1 + rate ÷ 100)
A common mistake is removing VAT by taking the rate off the total. At 5%, 1,050 × 0.95 gives 997.50, but the right answer is 1,050 ÷ 1.05 = 1,000. VAT was added to the smaller, pre-tax price, so you have to divide to undo it.
The same maths works for GST and most sales taxes. Rates differ by country and sometimes by product, so check the current rate that applies to you.
Questions people ask
Why can't I just subtract the VAT percentage from the total?
Because VAT was calculated on the lower, pre-tax price. Subtracting the percentage from the bigger total takes off too much. Divide by (1 + rate) instead.
Does this work for GST or sales tax?
Yes. The maths is identical. Enter your GST or sales tax rate in the rate field.
How do I work out VAT on several items?
Add up the pre-VAT prices first, then add VAT to the total. Tax rules on rounding per line versus per invoice vary, so check yours if the cents matter.