As you know we love Cloud Accounts packages like Xero. The beauty of these systems is they are always up to date and can process your transactions smoothly, assuming no human errors get in the way.
However sometimes you may still need to calculate VAT manually – whether for a quote or a proforma invoice. You may also want to doublecheck that an invoice (or bill) from your supplier has the correct VAT.
However be careful! Percentages can be confusing. The most common VAT rate at the time of writing this blog is 20%. If the gross price of an item is £100 then the VAT isn’t £20! The VAT is actually £16.67 because the 20% VAT is calculated on the net amount, which in this case is £83.33.
So 20% of £83.33 is £16.67 and to prove this: £83.33 + £16.67 = £100.
If the net price was £100 then the VAT would be £20 and the gross price is £120.
Confused? Well fortunately our friends at VAT Calculator UK have an online free tool that works it all out for you! Head over to their website and see their VAT calculator. Add £100 and click the Add VAT button and then try Remove VAT button. You will see my manual calculations above agree to the results of their VAT Calculator.
All very simple! So bookmark their page and never be confused about the maths of working out VAT.