This calculator shows how to correctly apply VAT after a discount has been applied. It is essential for ecommerce sellers, retailers, and businesses running promotions.
In UK VAT rules, VAT is always calculated on the final selling price after any discounts. This means both your revenue and VAT amount are reduced when a discount is applied.
Understanding this relationship is critical for pricing strategy, margin protection, and accurate financial reporting.
The calculator shows the discounted net price, VAT amount, and final total. This helps you understand how discounts affect both tax and revenue.
Because VAT is calculated after the discount, both the VAT amount and your effective revenue decrease. This is critical when evaluating profitability.
Discounted price = Net × (1 − Discount ÷ 100)
VAT = Discounted price × (rate ÷ 100)
Total = Discounted price + VAT
VAT is always calculated on the amount actually paid by the customer after any discounts.
Discounting has a double impact: it reduces both your revenue and the VAT amount. While lower VAT may seem beneficial, the reduction in net revenue can significantly impact your margins.
For example, a £200 product discounted by 20% becomes £160. VAT at 20% is then £32, giving a total of £192. Your actual revenue is £160, not £200 — a substantial reduction.
This is especially important for ecommerce businesses running promotions, where fees, advertising costs, and shipping are often calculated on the final price.
Example 1:
£200 with 10% discount → £180 → VAT £36 → Total £216
Example 2:
£120 with 25% discount → £90 → VAT £4.50 → Total £94.50
Example 3:
Applying VAT before discount leads to incorrect totals and pricing errors.
After the discount is applied.
Yes, because VAT is calculated on the reduced price.
It ensures accurate pricing, reporting and margin analysis.