A reverse VAT calculation works backwards. Instead of adding VAT to a net price, you start with a gross (VAT-inclusive) amount and extract the VAT that is already inside it.
This comes up constantly in real business situations — a supplier sends an invoice showing only the total, a receipt shows a VAT-inclusive price, or you need to check how much VAT you actually paid on a purchase. The reverse calculation tells you both the net amount and the exact VAT figure buried inside any gross price.
The tool at the top of our VAT Calculator homepage handles this instantly. Select "Remove VAT", enter the gross amount, choose your rate, and the net and VAT figures appear immediately.
This is the single most common VAT calculation mistake made by small business owners and sole traders.
The wrong method:
£120 − (£120 × 20%) = £120 − £24 = £96 ❌
The correct method:
£120 ÷ 1.20 = £100 net ✅ VAT = £120 − £100 = £20
Subtracting 20% from the gross gives the wrong answer because the VAT was calculated on the net — not the gross. The percentage was applied going forwards on a smaller number. To reverse it, you must divide.
| VAT Rate | Formula to Remove VAT | Formula to Find VAT Amount |
|---|---|---|
| 20% (standard) | Gross ÷ 1.20 | Gross ÷ 6 |
| 5% (reduced) | Gross ÷ 1.05 | Gross − (Gross ÷ 1.05) |
| 0% (zero) | No VAT to remove | £0.00 |
The 1/6 shortcut at the standard rate is exact — not an approximation. On any VAT-inclusive price at 20%, dividing by 6 gives you the precise VAT amount every time.
A contractor receives a £960 invoice marked as VAT-inclusive. How much is the VAT and what is the net?
Net = £960 ÷ 1.20 = £800 VAT = £960 ÷ 6 = £160 Check: £800 + £160 = £960 ✅
A landlord pays a £630 energy bill including 5% VAT. What is the VAT amount?
Net = £630 ÷ 1.05 = £600 VAT = £630 − £600 = £30
A sole trader's quarterly expenses total £4,800 gross at 20%. VAT to reclaim on the next return:
VAT = £4,800 ÷ 6 = £800
Reclaiming input VAT on expenses
When you file your VAT return, you reclaim the VAT paid on business purchases. Most receipts and invoices show a VAT-inclusive total. You need the reverse calculation to split the net from the VAT on each line.
Checking supplier invoices
A VAT-registered supplier must show the net amount, VAT rate, VAT amount, and gross total separately on every invoice. If they show only a gross total, you can reverse-calculate to verify their figures are correct before paying.
Bookkeeping and reconciliation
Accounting software handles this automatically — but understanding the formula means you can spot errors before they reach your VAT return.
Flat Rate Scheme users
If you are on the Flat Rate Scheme, you still charge 20% VAT on your invoices. Knowing the reverse calculation helps you verify what you collected versus what you owe HMRC under your flat rate percentage.
To remove VAT from a gross price in Excel, with the gross amount in cell B2 and rate in C2:
| Purpose | Formula |
|---|---|
| Net amount | =B2/(1+C2/100) |
| VAT amount | =B2-B2/(1+C2/100) |
| VAT at 20% shortcut | =B2/6 |
| Net at 20% shortcut | =B2*5/6 |
If a supply is zero-rated, there is no VAT to remove — the gross and net are the same figure. If a supply is exempt, VAT was never charged in the first place.
Understanding the difference between zero-rated and exempt matters because it affects what you can reclaim as input VAT. Full details are covered in our UK VAT Rates guide.
Divide the gross (VAT-inclusive) price by 1.20 for the standard 20% rate. The result is the net amount. Subtract the net from the gross to get the VAT amount. Never subtract 20% directly from the gross — that gives the wrong answer.
At 20%: £120 ÷ 6 = £20 VAT. The net is £100.
Divide the gross by 1.05. Example: £210 ÷ 1.05 = £200 net. VAT = £10.
Yes. At 20% VAT, the VAT fraction is exactly 1/6 of the gross. It is not a rounding shortcut — it is the mathematically precise result of the formula Gross × (0.20 ÷ 1.20).