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How to Calculate VAT? PDF Print E-mail
Written by Cecilia Chee, Singapore   
Monday, 03 October 2011 13:26

 

 

How to Calculate How Much VAT Will Cost

 

The current normal rate of VAT in the United Kingdom is 17.5%. There are two ways to calculate the amount something will cost when VAT has been added. Lets assume that an item costs £72.33 excluding VAT and the VAT rate is 17.5%. The first method:

( [VAT Rate] / 100 ) * [Original Price] = [Amount of VAT Payable]
for example			
( 17.5 / 100 ) * 72.33 = 12.66 (rounded)
to get the final price add £12.66 to £72.33 to get £84.99

The second method calculates the final value in one step. Neither method is better so use whichever is most convenient. The second method:

( ( [VAT Rate] + 100 ) / 100 ) * [Original Price] = [Total Price Including VAT]
for example
( ( 17.5 + 100 ) / 100 ) * 72.33 = 84.99 (rounded)
to recover the portion of the final value that is VAT 
subtract the original value from the final value. 
e.g. £84.99 - £72.33 = £12.66

How to Calculate How Much VAT Has Cost

Use this calculation to work out how much VAT has been / will be paid on a given purchase. Note that you can't simply work out 17.5% of the final value and use that figure as it will be to high. For the example below assume that a left handed widget worth £84.99 is being purchased and the VAT rate is 17.5%. You work out how much VAT is being paid like this:

( 100 / ( 100 + [VAT Rate] ) * [Final Price] = [Pre-VAT Price]
for example
( 100 / ( 100 + 17.5 ) ) * 84.99 = 72.33 (rounded)

 

Last Updated on Monday, 03 October 2011 13:26
 
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