How to Calculate VAT — Complete Guide for 2026
Understanding how to calculate VAT is essential for every business owner, accountant, and freelancer. Whether you need to add VAT to a net price, remove VAT from a gross amount, or understand the difference between VAT inclusive and VAT exclusive — this complete guide covers everything with clear formulas and real examples.
We cover VAT calculation for South Africa (15%) and the United Kingdom (20%) — the two highest-traffic markets for VAT calculation queries globally. For instant calculations, use our free country VAT calculators below.
VAT Explained — Watch Before You Read
New to VAT? This short video from Mastering Accounting Skills gives you a clear overview of how Value Added Tax works before we dive into the formulas and examples below. Over 70,000 people have watched this explanation — it is one of the clearest VAT introductions available.
Video: All About VAT & Its Accounting Treatment — Mastering Accounting Skills
What is VAT?
VAT — or Value Added Tax — is a consumption tax applied to goods and services at each stage of the supply chain, from production to final sale. Unlike a sales tax which is only charged at the point of sale, VAT is collected at every stage where value is added. It is one of the most common taxes in the world, used in over 160 countries including South Africa, the United Kingdom, Ireland, and the UAE.
Multi-Stage Tax
VAT is charged at every stage of production and distribution — manufacturer, wholesaler, retailer — not just at the final sale.
Collected by Businesses
VAT-registered businesses collect VAT from customers on behalf of the government and pay it through regular VAT returns.
Input VAT Recovery
Businesses can reclaim the VAT they pay on their own purchases — called input VAT — offsetting it against the VAT they collect from customers.
Varies by Country
VAT rates differ across countries — South Africa charges 15%, the UK 20%, Ireland up to 23%, and the UAE 5%. Each country also has zero-rated and exempt categories.
The VAT Formula
There are two core VAT calculations every business needs to know — adding VAT to a net price and removing VAT from a gross price. Here are the formulas with worked examples for both.
➕ Adding VAT to a Net Price
Example at 15% (South Africa):
Net Price = R100
VAT Amount = R100 × 0.15 = R15
Gross Price = R100 × 1.15 = R115
➖ Removing VAT from a Gross Price
Example at 20% (UK):
Gross Price = £120
Net Price = £120 ÷ 1.20 = £100
VAT Amount = £120 − £100 = £20
South Africa
Standard VAT rate since 2018
United Kingdom
Standard VAT rate since 2011
Ireland
Standard VAT rate in 2026
UAE
Standard VAT rate since 2018
How to Calculate VAT Inclusive
A VAT inclusive price already contains VAT within it — the gross price the customer pays. A VAT exclusive price is the net price before VAT is added. Understanding the difference is critical for correct invoicing and VAT returns. Here is how to calculate both.
Price Already Includes VAT
A VAT-inclusive price (also called a gross price) already has VAT built in. To find out how much VAT is included, you need to work backwards using the reverse VAT formula.
Net = R230 ÷ 1.15 = R200
VAT Amount = R230 − R200 = R30
Price Does Not Include VAT
A VAT-exclusive price (also called a net price) does not include VAT. To calculate the final price the customer pays, you add VAT on top using the standard VAT formula.
VAT Amount = £200 × 0.20 = £40
Gross = £200 + £40 = £240
VAT Inclusive vs VAT Exclusive — Comparison Table
Here is a side-by-side comparison of VAT inclusive and VAT exclusive prices across different VAT rates to make the difference clear at a glance.
| Scenario | Net Price (Excl. VAT) | VAT Amount | Gross Price (Incl. VAT) |
|---|---|---|---|
| South Africa 15% — Add VAT to R100 | R100.00 | R15.00 | R115.00 |
| South Africa 15% — Remove VAT from R500 | R434.78 | R65.22 | R500.00 |
| UK 20% — Add VAT to £100 | £100.00 | £20.00 | £120.00 |
| UK 20% — Remove VAT from £500 | £416.67 | £83.33 | £500.00 |
| Ireland 23% — Add VAT to €100 | €100.00 | €23.00 | €123.00 |
| UAE 5% — Add VAT to AED 100 | AED 100.00 | AED 5.00 | AED 105.00 |
VAT Input vs VAT Output — What is the Difference?
Every VAT-registered business deals with two types of VAT — input VAT (VAT you pay on purchases) and output VAT (VAT you charge on sales). The difference between the two determines how much VAT you owe to the tax authority — or how much you can reclaim.
Input VAT
Input VAT is the VAT your business pays on purchases — stock, supplies, equipment, professional services. As a VAT-registered business, you can reclaim this VAT from the tax authority, reducing your overall VAT liability.
Your input VAT = R150 — this can be reclaimed.
Output VAT
Output VAT is the VAT your business charges on sales to customers. You collect this VAT on behalf of the government and pay it over through your VAT return, minus any input VAT you can reclaim.
Your output VAT = R300 — this is owed to SARS.
How to Calculate VAT Payable to SARS / HMRC
If your output VAT is greater than your input VAT, you owe the difference to the tax authority. If your input VAT exceeds your output VAT, you can claim a VAT refund.
Total Output VAT
Add up all VAT charged on your sales for the period.
Total Input VAT
Add up all VAT paid on your purchases and expenses.
Calculate Difference
Subtract input VAT from output VAT to get your VAT liability.
Pay or Reclaim
If positive — pay to SARS/HMRC. If negative — reclaim the refund.
How VAT Flows Through the Supply Chain (15% SA Example)
🌾 Farmer
Sells wheat for R100
Charges R15 VAT
Pays R15 to SARS
🏭 Manufacturer
Buys for R115
Sells for R200 + R30 VAT
Pays R15 to SARS (R30−R15)
🏪 Retailer
Buys for R230
Sells for R300 + R45 VAT
Pays R15 to SARS (R45−R30)
🛒 Consumer
Pays R345 total
R45 VAT included
Cannot reclaim VAT
How to Calculate VAT in South Africa
South Africa’s standard VAT rate is 15%, administered by the South African Revenue Service (SARS). VAT was first introduced in South Africa in 1991 at 10%, increased to 14% in 1993, and raised to the current rate of 15% on 1 April 2018. Here is everything you need to know about calculating VAT in South Africa in 2026.
➕ Adding 15% VAT (South Africa)
Example: Net price = R500
VAT Amount = R500 × 0.15 = R75
Gross (incl. VAT) = R575
➖ Removing 15% VAT (South Africa)
Example: Gross price = R500
Net = R500 ÷ 1.15 = R434.78
VAT Amount = R500 − R434.78 = R65.22
📊 Formula — 15% of Any Amount
15% of R100 = R15
15% of R250 = R37.50
15% of R1,000 = R150
| Net Amount (Excl. VAT) | VAT Amount (15%) | Gross Amount (Incl. VAT) |
|---|---|---|
| R100 | R15.00 | R115.00 |
| R250 | R37.50 | R287.50 |
| R500 | R75.00 | R575.00 |
| R1,000 | R150.00 | R1,150.00 |
| R2,500 | R375.00 | R2,875.00 |
| R5,000 | R750.00 | R5,750.00 |
| R10,000 | R1,500.00 | R11,500.00 |
VAT Registration Thresholds in South Africa (2026)
Mandatory Registration
Annual taxable turnover above R2.3 million requires compulsory VAT registration with SARS.
Voluntary Registration
Businesses with turnover above R120,000 may register voluntarily to reclaim input VAT.
Not Required
Businesses below R120,000 turnover cannot register for VAT in South Africa.
How to Calculate VAT in the UK
The UK standard VAT rate is 20%, administered by HM Revenue & Customs (HMRC). Unlike South Africa which has one standard rate, the UK has three VAT rates — standard (20%), reduced (5%), and zero (0%). Here is how to calculate UK VAT correctly in 2026.
➕ Adding 20% VAT (UK Standard)
Example: Net price = £500
VAT Amount = £500 × 0.20 = £100
Gross (incl. VAT) = £600
➖ Removing 20% VAT (UK Standard)
Example: Gross price = £600
Net = £600 ÷ 1.20 = £500
VAT Amount = £600 − £500 = £100
➕ Adding 5% Reduced Rate (UK)
Example: Net price = £200
VAT Amount = £200 × 0.05 = £10
Gross (incl. VAT) = £210
| VAT Rate | Type | Applies To |
|---|---|---|
| 20% | Standard Rate | Most goods and services — retail, professional services, electronics, clothing, restaurants, hotels |
| 5% | Reduced Rate | Domestic energy and fuel, children’s car seats, mobility aids, some renovation work, sanitary products |
| 0% | Zero Rate | Most food, children’s clothing and footwear, books and newspapers, public transport, new residential buildings |
| Net Amount (Excl. VAT) | VAT Amount (20%) | Gross Amount (Incl. VAT) |
|---|---|---|
| £100 | £20.00 | £120.00 |
| £250 | £50.00 | £300.00 |
| £500 | £100.00 | £600.00 |
| £1,000 | £200.00 | £1,200.00 |
| £2,500 | £500.00 | £3,000.00 |
| £5,000 | £1,000.00 | £6,000.00 |
| £10,000 | £2,000.00 | £12,000.00 |
How to Calculate VAT — Frequently Asked Questions
Answers to the most common VAT calculation questions for South Africa, the UK, and beyond. Use our free South Africa VAT Calculator or UK VAT Calculator to get instant results.
To calculate VAT, multiply the net price by the VAT rate. For example, at 15% (South Africa): R100 × 0.15 = R15 VAT, making the gross total R115. At 20% (UK): £100 × 0.20 = £20 VAT, making the gross total £120. To remove VAT from a gross price, divide by (1 + VAT rate) — so R115 ÷ 1.15 = R100 net.
A VAT inclusive price already contains VAT. To find the VAT amount within a VAT-inclusive price, use the formula: VAT Amount = Gross Price − (Gross Price ÷ (1 + VAT Rate)). For example at 15%: R230 inclusive — Net = R230 ÷ 1.15 = R200, VAT = R230 − R200 = R30. The VAT is already inside the price — you are simply extracting it.
A VAT exclusive price does not include VAT — it is the net price. To calculate the VAT exclusive amount from a gross price, divide by (1 + VAT rate). At 15%: R575 ÷ 1.15 = R500 net (VAT exclusive). At 20%: £600 ÷ 1.20 = £500 net (VAT exclusive). The VAT exclusive price is always lower than the VAT inclusive price.
At South Africa’s standard 15% VAT rate, the answer depends on whether R500 is VAT-exclusive or VAT-inclusive. If R500 is VAT-exclusive (net price), the VAT amount is R75 and the gross total is R575. If R500 is VAT-inclusive (gross price), the VAT portion is R65.22 and the net price is R434.78. Use our South Africa VAT Calculator to calculate VAT on any amount instantly.
The formula to calculate VAT at 15% (South Africa) is: VAT Amount = Net Price × 0.15 and Gross Price = Net Price × 1.15. To remove 15% VAT from a gross price: Net Price = Gross Price ÷ 1.15. For example: Net R200 × 1.15 = Gross R230. Reverse: Gross R230 ÷ 1.15 = Net R200.
Input VAT is the VAT your business pays on purchases — you can reclaim this from SARS or HMRC. Output VAT is the VAT your business charges on sales — you owe this to the tax authority. The difference is your VAT liability: VAT Payable = Output VAT − Input VAT. If output VAT exceeds input VAT, you pay the difference. If input VAT exceeds output VAT, you can claim a VAT refund.
To calculate VAT in the UK at the standard 20% rate: multiply the net price by 0.20 to get the VAT amount, then multiply by 1.20 to get the gross price. Example: Net £500 × 1.20 = Gross £600, VAT = £100. To remove 20% VAT from a gross price, divide by 1.20. Example: £600 ÷ 1.20 = £500 net. The UK also has a reduced rate of 5% for domestic energy and certain other goods. Use our UK VAT Calculator for instant results.
To calculate VAT backwards (reverse VAT) from a VAT-inclusive gross price, divide by (1 + VAT rate) to get the net price, then subtract to find the VAT amount. At 15% (SA): Gross R575 ÷ 1.15 = Net R500, VAT = R75. At 20% (UK): Gross £120 ÷ 1.20 = Net £100, VAT = £20. At 5% (UAE): Gross AED 105 ÷ 1.05 = Net AED 100, VAT = AED 5. Use our UAE VAT Calculator or VAT Calculator Ireland for other countries.
Official South Africa VAT Guidance
For official VAT rules, registration requirements, and VAT return filing in South Africa, visit the South African Revenue Service (SARS) website.
Visit SARS →Official UK VAT Guidance
For official UK VAT rates, registration thresholds, and VAT return guidance, visit HM Revenue & Customs (HMRC) — the UK’s tax authority.
Visit HMRC →