How to add or remove VAT and GST from a price
Adding tax to a price is easy. Taking it back out is where most people go wrong. Here is how both work.
Adding tax
Multiply the price by the tax rate and add the result. A price of 100 with 20% tax:
tax = 100 x 0.20 = 20
total = 100 + 20 = 120
Shortcut: total = price x 1.20Removing tax: the common mistake
If a price of 120 already includes 20% tax, you do not subtract 20% of 120. That gives 96, which is wrong. The 20% was worked out on the price before tax, not on the total.
The correct way is to divide by 1 plus the rate:
price before tax = 120 / 1.20 = 100
tax = 120 - 100 = 20Typical rates
Tax rates differ by country and by type of goods. At the time of writing, the standard rate is 20% VAT in the UK, 15% GST in New Zealand, 10% GST in Australia and 15% VAT in Bangladesh. Some products are exempt or taxed at a reduced rate, and rates change, so always check with your tax authority for the one that applies to you.
Do it in seconds
The VAT and GST calculator lets you pick add or remove, enter the price and the rate, and see the price before tax, the tax amount and the total. Quick buttons set common rates.
Rounding on invoices
Shops and invoicing software round in different ways: per line, or on the total. That can create differences of a cent or two between your figures and an invoice, which is normal.