How do I remove 20% VAT from a price?

Divide the gross price by 1.2. The result is the net, and the difference is the VAT. Do not subtract 20% — that gives an answer about 4% too low, because the 20% was added to the net rather than taken from the gross.

What is the VAT fraction?

The multiplier that gets VAT directly from a gross figure: the rate divided by one plus the rate. At 20% that is 20/120, which simplifies to one sixth, so the VAT in a gross price is the gross divided by six. At 5% it is one twenty-first.

Why does subtracting the VAT rate give the wrong answer?

Because the percentage was calculated on the net, not on the gross. Adding 20% to 100 gives 120, but taking 20% off 120 gives 96 rather than 100 — the same percentage applied to a larger base removes more than was added. Reversing an addition requires division.

How do I work out GST backwards in Australia?

Divide the gross by 1.1 to get the net, or divide the gross by eleven to get the GST directly. New Zealand's 15% rate reverses by dividing by 1.15. The method is the same as VAT; only the multiplier changes.

Can I reverse VAT on a receipt with mixed rates?

Not as a single total. Standard-rated and zero-rated items have to be separated and reversed at their own rates, because dividing the whole receipt by 1.2 attributes VAT to items that never carried any. This is precisely why point-of-sale systems record a tax rate per line rather than one per transaction.

How to work out VAT backwards from a gross price

To take 20% VAT out of a gross price, divide by 1.2. Subtracting 20% instead is the single most common error in bookkeeping, and it understates the net figure by 4%.

Published 12 August 2026

The rule, and why the obvious method fails

VAT is added to the net price, so the gross price is the net plus a percentage of the net. Reversing that means dividing, not subtracting.

At 20%: net = gross ÷ 1.2, and the VAT is the difference. At 5%, divide by 1.05. At 23%, divide by 1.23. The general form is net = gross ÷ (1 + rate).

The tempting shortcut is to take 20% off the gross. It gives the wrong answer, and always in the same direction. On a gross of £120: dividing by 1.2 gives a net of £100 and VAT of £20, which is correct because 20% of 100 is 20. Subtracting 20% gives £96, and implies VAT of £24 — which would be 25% of £96, not 20%.

The error is about 4% of the net at a 20% rate. On a single invoice that is a rounding annoyance. Applied across a year of gross-inclusive takings it is a material misstatement of turnover.

The VAT fraction, if you prefer multiplying

The same operation can be done as a multiplication, which some people find easier to check. To get the VAT directly from a gross figure, multiply by the rate over one plus the rate.

At 20% that fraction is 20/120, which simplifies to 1/6. So VAT is the gross divided by six, and the net is what remains. At 5% the fraction is 5/105, or 1/21. At 23% it is 23/123.

The one-sixth rule is worth memorising if you work with UK VAT, because it makes a mental check trivial: £120 gross, VAT is £20, net is £100.

Where it goes wrong in practice

Mixed-rate baskets. A receipt containing standard-rated and zero-rated items cannot be reversed as a whole. Dividing the total by 1.2 treats the zero-rated food as though it carried VAT. Each rate has to be reversed separately, which is why till systems track them separately.

Rounding. Reverse the total or reverse each line, and the answers can differ by a penny or two. Tax authorities generally accept either provided you are consistent, but alternating between them within one return produces discrepancies that are tedious to trace.

Discounts. A discount applied after VAT has been calculated changes the VAT due. The order of operations matters, and getting it backwards overstates the tax.

Assuming the rate. Reduced and zero rates apply to more categories than people expect, and they differ by country. Dividing by 1.2 out of habit on something that was never standard-rated invents VAT that was never charged.

GST works the same way

The arithmetic is identical wherever tax is included in the displayed price. Australian and New Zealand GST at 10% and 15% reverse by dividing by 1.1 and 1.15; the Australian shortcut is that GST is the gross divided by eleven.

US sales tax is the exception worth flagging, because it is normally quoted exclusive and added at the till. If you are reversing a US total you are usually doing it because the price was advertised tax-inclusive, which is unusual there and worth double-checking before you assume a rate.

Common questions

How do I remove 20% VAT from a price?: Divide the gross price by 1.2. The result is the net, and the difference is the VAT. Do not subtract 20% — that gives an answer about 4% too low, because the 20% was added to the net rather than taken from the gross.
What is the VAT fraction?: The multiplier that gets VAT directly from a gross figure: the rate divided by one plus the rate. At 20% that is 20/120, which simplifies to one sixth, so the VAT in a gross price is the gross divided by six. At 5% it is one twenty-first.
Why does subtracting the VAT rate give the wrong answer?: Because the percentage was calculated on the net, not on the gross. Adding 20% to 100 gives 120, but taking 20% off 120 gives 96 rather than 100 — the same percentage applied to a larger base removes more than was added. Reversing an addition requires division.
How do I work out GST backwards in Australia?: Divide the gross by 1.1 to get the net, or divide the gross by eleven to get the GST directly. New Zealand's 15% rate reverses by dividing by 1.15. The method is the same as VAT; only the multiplier changes.
Can I reverse VAT on a receipt with mixed rates?: Not as a single total. Standard-rated and zero-rated items have to be separated and reversed at their own rates, because dividing the whole receipt by 1.2 attributes VAT to items that never carried any. This is precisely why point-of-sale systems record a tax rate per line rather than one per transaction.