If you’re shopping for products or services, be it online or in person at a specific location, you’ll often see prices advertised exclusive of VAT. While sometimes, the businesses that do this are helpful and also tell you the total price, it can be frustrating when this isn’t done. However, we still need to work out the VAT, so we know the total price, and potentially need the VAT figure for personal tax reasons, too.
Thankfully, adding the VAT to purchases is easy. Here’s how you do it.
Adding the Standard Rate
The standard rate of VAT is 20%, which is applicable to most products and services. Therefore, to add this to a VAT exclusive price, you simply have to multiply this by 1.2.
For example, if you see something advertised at £100 excluding VAT, a quick calculation of £100 x 1.2 will tell you that the total cost is £120, and the VAT figure, if you need to know it, is £20. Most businesses who advertise goods or services exclusive of VAT will provide a breakdown of this on an invoice or receipt.
Adding the Reduced Rate
The reduced rate of VAT is 5%, applicable to things like child car seats, and mobility aids for the elderly. The principle is the same as before, only this time you’re multiplying by 1.05 rather than 1.20.
Using the £100 figure from earlier, you’d simply calculate £100 by 1.05, for a total price of £105 and a VAT figure of £5.