Issuing invoices
Starting from the pre-tax price, getting the total with the breakdown the invoice has to show.
VAT calculator
Calculate VAT on an amount, either way.
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What it is for
Calculating VAT seems simple until you have to do it backwards. Adding it is straightforward: multiply the base by the rate and add. Extracting it from a price that already includes it is where almost everyone slips, because the intuitive move is to subtract the same percentage.
And it does not work that way. If a final price is 121 with a 21% rate, the base is not found by taking 21% off 121, which would give 95.59. You divide by 1.21, which gives 100. The gap looks small in one example, but accumulated across a set of accounts it produces discrepancies that are painful to track down.
The tool performs both operations and shows the full breakdown of base, tax and total, which is what an invoice or a bookkeeping entry needs.
How it works
- Enter the amount and the applicable VAT/tax percentage.
- Choose whether to add VAT to a base price or extract it from a total amount.
- The breakdown of base, VAT and total is calculated instantly.
When to use it
Breaking down a receipt
From an amount including VAT, separating base from tax for the accounts.
Quoting
Working out what remains of a final price agreed with the client once the tax is taken out.
Practical tips
- To extract VAT you divide by 1 plus the rate, not subtract the percentage. This is the commonest error.
- The calculation is generic: it works for any country by entering the applicable rate.
- Many countries run several rates depending on the product or service. Check which applies before calculating.
- Round only at the end. Rounding at intermediate steps causes discrepancies of a few cents.
Frequently asked questions
What's the difference between "add" and "extract" VAT?
"Add" starts from a price without tax and calculates the total with VAT included; "extract" does the opposite, starting from a final price and calculating how much of it is base and how much is VAT.
Does it work for any country?
Yes, the calculation is generic math; you just need to enter the VAT (or equivalent tax) percentage that applies in your case.