Value Added Tax (VAT) is the European equivalent of sales tax in the United States. When retailers or service providers sell or provide taxable goods or services, they must collect VAT on the item and forward that amount to the government. A VAT inclusive price is the price of an item that includes the VAT. For example, if an item costs £100 and the VAT rate is 17.5 per cent, then the VAT inclusive price is £117.50.
- Skill level:
Things you need
Find out the VAT rate for your item. For example, the VAT rate might be 17.5 per cent.
Convert the VAT rate to a decimal by moving the decimal place two places to the left. For example, 17.5 per cent converted to a decimal is 0.175.
Add 1 the resulting number. In the above example, 0.175 + 1 = 1.175.
Multiply the price of your item by the amount you calculated in Step 3. For example, a £200 item taxed at a VAT rate of 17.5 per cent would have a VAT inclusive rate of:
£200 * 1.175 = £235.
Tips and warnings
- To find out the VAT rate for your item, Her Majesty's Revenue and Customs (HMRC) keeps a web page updated with current rates of VAT on goods and services. Click on the HMRC website in References, then click on "VAT" under Businesses and Services. Click on "VAT rates, thresholds, fuel scale charges, exchange rates," then click on "Rates of VAT on different goods and services."
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