How to get from a VAT inclusive price to the net
A price that includes 20% VAT is 120% of the net price. Learn the VAT fraction, 1/6, and take the VAT out of any gross price.
This path is practice in how the records and the sums work. It is not tax advice. Any rate or allowance in a question is an example for that question, so check GOV.UK for the current figures.
In this room: 3 tasks, 10 questions
- Why you cannot just take 20% off3 questions
- The VAT fraction4 questions
- A day's takings3 questions
A VAT inclusive price is the gross price: net plus VAT. At 20%, the gross is 120% of the net.
- Net is the gross divided by 1.2
- VAT is the gross less the net
Taking 20% off the gross gives the wrong answer. The VAT was 20% of the net, and the net is the smaller figure.
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2 more questions follow in this task.
There is a shortcut. Out of every £120 of a gross price at 20%, £20 is VAT. 20 out of 120 is one sixth.
- VAT fraction
- the share of a gross price that is VAT. At 20% it is 1/6.
So at 20%, the VAT is the gross divided by 6. At the reduced rate of 5%, £5 out of every £105 is VAT, so the VAT fraction is 5/105.
Answer the questions below
3 more questions follow in this task.
A shop till records what customers paid, so till takings are gross. The books need the net sales and the VAT as separate figures.
| Rate | Takings, including VAT |
|---|---|
| Standard rate, 20% | 1,440.00 |
| Reduced rate, 5% | 378.00 |
| Zero rate, 0% | 310.00 |
Use the VAT fraction for each rate: divide by 6 at 20%, and by 21 at 5%.
Answer the questions below
2 more questions follow in this task.