Reverse VAT Calculator
Reverse VAT
This reverse VAT calculator allows you to remove VAT from a total price and extract both the net value and VAT amount. It is essential for ecommerce sellers, accountants, and business owners working with VAT-inclusive pricing.
A common mistake is subtracting VAT directly from the total price. This produces incorrect results because VAT is calculated as a percentage of the net value, not the gross amount. The correct method requires reversing the VAT using division.
This tool ensures accurate VAT breakdowns so you can analyse revenue, validate invoices, and protect your margins.
Result Explanation
The calculator separates a VAT-inclusive price into two parts: the net value (your actual revenue) and the VAT amount (the tax included in the total).
This distinction is critical. If you treat the gross amount as revenue, you will overestimate your earnings and miscalculate your profit.
How this tool works
The calculator divides the VAT-inclusive total by one plus the VAT rate to recover the net amount. It then subtracts net from gross to calculate the VAT included in the total.
Strategy & Pricing Insight
Reverse VAT is essential when analysing real business performance. For example, if you receive £120 from a sale, your actual revenue is only £100 at 20% VAT. The remaining £20 must be paid to HMRC.
If you calculate profit based on the full £120, your margin will appear higher than it actually is. This can lead to poor pricing decisions and unprofitable campaigns.
Using this calculator ensures your financial decisions are based on accurate net revenue, not misleading gross figures.
Examples
Example 1:
£120 total → £100 net + £20 VAT
Example 2:
£105 total at 5% → £100 net + £5 VAT
Example 3:
Incorrect method: subtracting VAT directly leads to wrong results.
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Frequently Asked Questions
How do you reverse VAT?
Divide by (1 + VAT rate), then subtract to get VAT.
Why can’t VAT be subtracted directly?
Because VAT is based on the net amount, not the total.
Is VAT profit?
No, VAT is collected on behalf of HMRC.
Running a business? Use our Pricing & Profit Hub to find more tools for margins, markups, and tax estimation.