Value Added Tax (VAT): Difference between revisions
Created page with "Value Added Tax or VAT is a UK sales tax which is charged on the sale of most goods and services. It is a charge to the end consumer and is not something an organisation gets to keep. Instead they must keep track of how much is collected and pay this to HMRC. VAT is calculated as a percentage and is currently 20% but this is subject to change, for years it was 17.5% and for a brief time it was reduced to 15%. == Calculating VAT From a VAT Incl..." |
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== Calculating VAT From a VAT Inclusive Price == | == Calculating VAT From a VAT Inclusive Price == | ||
Calculating VAT when it's not been included is fairly straight forward by following usual percentage calculations. Sometimes however (particularly in a primarily customer focused business) VAT rates are included in the price of an item sold. In this case the VAT need's to be calculated from a price which includes VAT. | Calculating VAT when it's not been included is fairly straight forward by following usual percentage calculations. Sometimes however (particularly in a primarily customer focused business) VAT rates are included in the price of an item sold. In this case the VAT need's to be calculated from a price which includes VAT. | ||
The simplest way to calulate VAT and the goods value from a VAT inclusive price is to first find out 1% of the total value and then multiply this by 100 to get the goods value and by the VAT percentage amount to get the VAT value. | |||
One way is to calculate this is to [[multiply]] by the [[percentage]] you want to find out. | One way is to calculate this is to [[multiply]] by the [[percentage]] you want to find out. | ||
Revision as of 04:03, 8 August 2025
Value Added Tax or VAT is a UK sales tax which is charged on the sale of most goods and services. It is a charge to the end consumer and is not something an organisation gets to keep. Instead they must keep track of how much is collected and pay this to HMRC.
VAT is calculated as a percentage and is currently 20% but this is subject to change, for years it was 17.5% and for a brief time it was reduced to 15%.
Calculating VAT From a VAT Inclusive Price
Calculating VAT when it's not been included is fairly straight forward by following usual percentage calculations. Sometimes however (particularly in a primarily customer focused business) VAT rates are included in the price of an item sold. In this case the VAT need's to be calculated from a price which includes VAT.
The simplest way to calulate VAT and the goods value from a VAT inclusive price is to first find out 1% of the total value and then multiply this by 100 to get the goods value and by the VAT percentage amount to get the VAT value.
One way is to calculate this is to multiply by the percentage you want to find out.
To use a simple example to calculate VAT on a price which doesn't include VAT the goods total is 100%, the VAT percentage is 20% so the total amount due is 120% - this is the equivalent percentage (100% good total + 20% VAT). If we were to put figures in say £200 (100%) is the goods total - the VAT due would be £40 (20%) so the total would be £200 (100%) + £40 (20%) = £240 (120%).
We can then use this to demonstrate going the other way - to find the goods total divide the total paid (£240) by the equivalent percentage (120%) i.e. the percentage of goods total + VAT percentage and multiply this by 100 to give a goods total of £200 or:
£240 / 120 x 100 = £200
And to find the VAT paid divide the total paid (£240) by the equivalent percentage (120%) and multiply the total amount by the VAT rate (20%):
£240 / 120 * 20 = £40