Value Added Tax, (VAT).
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How to add VAT (Value Added Tax) to a price

This is the calculation you need to use when:
you know a price before tax (the Net price)
but want to find out the price after tax (the Gross price).

(click here to see a similar calculation for deducting tax)

If we assume that VAT is at a rate of 17.5%...

Net price

multiplied by

1.175

= Gross price

Price before tax

multiplied by

1.175

= Price after tax

In the equation above, 1.175 is the multiplier. To get the multiplier, we need to convert the tax rate into a fraction by dividing it by 100 and then add the resulting fraction to 1.

So, if we assume that VAT is at a rate of 17.5%,
we will need to divide 17.5 by 100, giving 0.175, then add 1.
Thus the multiplier is 0.175 +1 = 1.175

So now let's assume that a tax is at a new rate of 2.5%...

First, get the multiplier :
2.5 100 = 0.025
0.025 + 1 = 1.025

The multiplier is 1.025

So...

Net price

multiplied by

1.025

= Gross price

Price before tax

multiplied by

1.025

= Price after tax

E.g :

     

£100

multiplied by

1.025

= £102.50

£100 + Tax

 

= £102.50 inc Tax


Deducting VAT from a price

Click here to see how to deduct tax from a price.

Stick it Where the Sun Don't Shine!

If you want to keep a copy of this guide, why not print it out and stick it onto the noticeboard in your accounts office.



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