| How to add VAT (Value Added Tax) to
a price
- (17.5%, 20% and 15%)
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)
20% (from Jan 4th 2011)
|
If we assume that VAT is at a rate of 20%... |
|
Net price |
multiplied by |
1.2 |
= Gross price |
|
Price before tax |
multiplied by |
1.2 |
= Price after tax |
|
VAT Fluctuations
17.5% (from Jan 1st 2010 - to Jan 4th 2011)
|
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 |
|
More about the 2010 June Budget
15% (from 1st Dec 2008 - Dec 31st 2009 )
|
If we assume that VAT is at a rate of 15%... |
|
Net price |
multiplied by |
1.15 |
= Gross price |
|
Price before tax |
multiplied by |
1.15 |
= Price after tax |
or in fractional form |
|
Price before tax |
multiplied by |
23/20 |
= Price after tax |
|
Other countries and USA states may have different sales tax rates.
Working with other rates of sales taxIn the equation above, 1.175
is the multiplier because we are working with a the UK VAT tax rate of 17.5%.
To get the multiplier for other sales-tax rates, 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 15%...
First, get the multiplier :
15 100 = 0.15
0.15 + 1 = 1.15
The multiplier is 1.15
So... |
|
Net price |
multiplied by |
1.15 |
= Gross price |
|
Price before tax |
multiplied by |
1.15 |
= Price after tax |
|
E.g : |
|
|
|
|
£100 |
multiplied by |
1.15 |
= £115 |
|
£100 + Tax |
|
|
= £115 inc Tax |
|
Working with The 2009 Temporary Rate of 15% VAT
Chancellor Alistair Darling introduced a temporary, lower, VAT rate in his pre-budget report announced on 24th Nov 2008. The temporary tax rate applied from 1st December 2008, running throughout 2009 up to January 1st 2010.
The chancellor confirmed during his 2009 Pre-Budget report (on Dec 9th 2009), that the old rate of 17.5% would come into effect again on January 1st 2010.
See practical details about this change
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. |
