PORcalc

VAT Calculator UK: Work Out VAT-Inclusive Pricing

Getting VAT wrong on a price either overcharges customers or quietly eats into your margin. Here's the arithmetic behind adding VAT, removing VAT, and pricing a product to hit a target profit after VAT.

Current UK VAT rates

Rate	Applies to
20% (standard)	Most goods and services
5% (reduced)	Certain goods, e.g. home energy, children's car seats
0% (zero-rated)	Most food, books, children's clothing

Rates and categories change periodically — always check current HMRC guidance for your specific product before pricing.

Adding VAT to a price

To go from a VAT-exclusive (net) price to a VAT-inclusive price, multiply by 1 + VAT rate:

• Net price × 1.20 = price including 20% VAT
• Example: £10.00 net × 1.20 = £12.00 inclusive of VAT

Removing VAT from a price

To go the other way — from a VAT-inclusive price back to the net amount — divide by 1 + VAT rate, don't just subtract the percentage:

• Inclusive price ÷ 1.20 = net price (at 20% VAT)
• Example: £12.00 inclusive ÷ 1.20 = £10.00 net

A common mistake is taking 20% off the inclusive price directly (£12.00 × 0.80 = £9.60) — this is wrong, because it doesn't reverse the original calculation correctly.

Pricing for profit after VAT

VAT isn't profit — it's collected on behalf of HMRC and passed on, so it needs to be worked out separately from your profit on return (POR) or margin. The order that matters:

1. Start from your cost price
2. Decide your target POR or margin on top of cost
3. Add VAT on top of that selling price to get the final customer-facing price

Doing this by hand across a product range is where errors creep in — a calculator that handles cost, VAT and target POR together in one step removes the guesswork.

Try the VAT & pricing calculator