How to add VAT or sales tax to a price
Multiply the price before tax by the tax rate, then add it on:
Tax = Price before tax × rate
Price with tax = Price before tax × (1 + rate)
Example at 20% VAT: 100 × 0.20 = 20 tax, so the price with tax is 120.
How to remove VAT from a price
A common mistake is to take 20% off a price that already includes 20% VAT. That gives the wrong answer. Divide instead:
Price before tax = Price with tax ÷ (1 + rate)
Example: a price of 120 that includes 20% VAT is 120 ÷ 1.20 = 100 before tax, so the VAT inside it is 20. Taking 20% off 120 would give 96, which is wrong.
| Price with 20% VAT | Price before VAT | VAT inside it |
|---|---|---|
| 12.00 | 10.00 | 2.00 |
| 60.00 | 50.00 | 10.00 |
| 120.00 | 100.00 | 20.00 |
| 1,200.00 | 1,000.00 | 200.00 |
VAT, GST and US sales tax
- VAT (value added tax) is used in the UK, the EU and many other countries. Prices shown to consumers usually already include it.
- GST (goods and services tax) works the same way and is used in places such as Australia, New Zealand, India and Canada.
- US sales tax is set by each state, and many cities and counties add their own. It is usually added at the till, not included in the shelf price. Pick a state above and tick the box to include the average local rate.
Rates are standard rates as of 2026. Reduced rates and exemptions depend on the product and the place, so check with your tax office or accountant before you file. This is not tax advice.
Put tax on your invoices automatically
If you charge VAT or sales tax to clients, the Small Business Starter Kit includes an invoice template that adds the tax, totals and due date for you, plus an income and expenses tracker.
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