VAT Inclusive vs Exclusive Prices: What the Difference Is and What UK Prices Must Show

By VAT Calculatorz · Last updated 15 October 2026

Definition: A VAT inclusive price (also written "inc VAT") is the full amount the customer pays — the net price plus the VAT, in one figure. A VAT exclusive price ("ex VAT" or "plus VAT") is the net price only, with the VAT still to be added on top. The two figures describe the same sale; they are just shown at different stages of the same calculation.

Quick answer: To turn an exclusive price into an inclusive one at the standard 20% rate, multiply by 1.2 (at 5%, multiply by 1.05). To go the other way — to calculate the VAT inside an inclusive price — divide by 1.2 at 20%: a £120 inclusive price is £100 net plus £20 VAT. And if you sell to consumers, the price you display must normally be the inclusive one (see the rules section below).

You do not need to do this by hand: our free VAT calculator adds or removes VAT at any rate in one step — enter the figure, choose "add VAT" or "remove VAT", and it shows the net, the VAT and the gross side by side.

Try it: VAT Inclusive ⇄ Exclusive Converter

Enter a price, pick the rate, and say whether your figure includes VAT — see the net, the VAT and the gross side by side.

Amount (£) VAT rate My amount is

Need more options? Use the full UK VAT Calculator — it's free.

The Two Formulas

You have	You want	At 20%	At 5%
Exclusive (net) price	Inclusive (gross) price	Net × 1.2	Net × 1.05
Inclusive (gross) price	Exclusive (net) price	Gross ÷ 1.2	Gross ÷ 1.05
Inclusive (gross) price	Just the VAT inside it	Gross × 1/6	Gross × 1/21

The fractions in the last row surprise people, so it is worth seeing why: at 20%, the VAT is 20% of the net price, which works out at one sixth of the gross price (£20 of VAT inside every £120). Taking 20% of the inclusive price is the most common mistake with VAT — it overstates the VAT, as Example 3 below shows.

The UK VAT Rates at a Glance

VAT rate	Type	To add VAT (net → gross)	To remove VAT (gross → net)	VAT inside the gross price
20%	Standard rate — most goods and services	Multiply by 1.2	Divide by 1.2	1/6 of the gross price
5%	Reduced rate — e.g. home energy, children's car seats	Multiply by 1.05	Divide by 1.05	1/21 of the gross price
0%	Zero rate — e.g. most food, books, children's clothes	No VAT to add	No VAT to remove	£0

Not sure which rate applies to what you sell — or whether the rates have changed? See our guide to the current VAT rate in the UK.

Worked Examples

Example 1 — Exclusive to inclusive (adding VAT)

A trade supplier quotes a laptop at £500 ex VAT. The rate is 20%.

Inclusive price: £500 × 1.2 = £600
The VAT part is £600 − £500 = £100

Example 2 — Inclusive to exclusive (finding the net)

A shop price tag says £45 inc VAT at 20%.

Net price: £45 ÷ 1.2 = £37.50
VAT inside the tag price: £45 − £37.50 = £7.50 (check: £45 × 1/6 = £7.50 ✓)

For a fuller walk-through of this direction, see our guide on how to remove VAT from a price.

Example 3 — The common mistake

A bookkeeper takes an inclusive invoice total of £1,200 and works out the VAT as 20% of £1,200 = £240. That is wrong.

Correct: £1,200 ÷ 1.2 = £1,000 net, so the VAT is £200 (also £1,200 × 1/6).
The mistake overstates the VAT by £40 — enough to misstate a VAT return.

Example 4 — The reduced rate (5%)

A price of £210 inc VAT at the reduced 5% rate (for example, a reduced-rate supply):

Net price: £210 ÷ 1.05 = £200
VAT inside it: £210 − £200 = £10 (check: £210 × 1/21 = £10 ✓)

Which Price Must You Show? The UK Display Rules

This is where inclusive vs exclusive stops being arithmetic and becomes law:

Selling goods to consumers: the displayed selling price must be inclusive of VAT. Under the Price Marking Order 2004, the "selling price" a trader shows consumers is the final price, including VAT and other taxes, and it must be unambiguous and clearly legible. In practice: the price on the shelf, tag or product page is the price the customer pays.
Services and online invitations to buy: the Price Marking Order covers goods, but the Digital Markets, Competition and Consumers Act 2024 is broader — where a trader invites a consumer to buy, the total price (including charges that cannot be avoided) must be shown clearly, or explained how it is calculated. Adding VAT only at the checkout on a consumer offer is misleading pricing.
Advertising prices: the UK advertising codes (CAP/BCAP) require quoted prices to include non-optional taxes that apply to all or most buyers. VAT-exclusive prices in ads are acceptable only where the price claim is clearly addressed to buyers who pay no VAT or can recover it (in practice, trade customers), and even then the amount or rate of VAT payable must be stated prominently next to it — for example "£500 ex VAT at 20%".
Selling to businesses (B2B): quoting ex VAT is normal and lawful in trade — trade buyers usually reclaim the VAT, so the net figure is the one that matters to them — as long as it is clear VAT will be added, and at what rate. If your customers are a mix of trade and public, show the inclusive price prominently; many sellers show both.
On the invoice: whatever the advert or shelf price showed, a VAT invoice must break the figures out — the net amount, the VAT rate, the VAT amount and the total payable. That breakdown is what your customer needs to reclaim the VAT, and what your own records need for the return. See our VAT return guide for how those figures flow into the boxes.

Step by Step: Quoting a Price Both Ways

Start from your net price — what you need to receive before VAT (your costs plus margin).
Add VAT at the correct rate for the goods or services (20% standard, 5% reduced, 0% zero-rated — check GOV.UK's VAT rates page if unsure): net × 1.2 or × 1.05.
Decide which figure leads. Consumers: lead with the inclusive price — it is the one the law expects them to see. Trade-only: you may lead with the exclusive price, labelled clearly as ex VAT with the rate stated.
Keep both figures in your records — net for your accounts, VAT amount for your return, gross for what the customer paid.
Sanity-check with the fraction: at 20%, the VAT inside any inclusive total is exactly one sixth of it. If your VAT figure is bigger than that, you have taken a percentage of the wrong number.

Doing this regularly? Our full guide to the VAT calculator for the UK shows the same formulas with more examples at every rate.

Sources and References

This guide is general information, not tax or legal advice. If your pricing mixes consumer and trade customers, or you sell both goods and services, check your display against the Trading Standards guidance or take advice before publishing prices.

FAQs

What does "inc VAT" mean?

It means the stated price already includes VAT — the figure shown is the full amount the customer pays, with nothing more to add for VAT at the till or checkout.

How do I calculate VAT inclusive from a net price?

Multiply the net price by 1 plus the VAT rate: × 1.2 for the standard 20% rate, or × 1.05 for the reduced 5% rate. £80 ex VAT at 20% is £80 × 1.2 = £96 inc VAT.

How much VAT is in an inclusive price?

At 20%, divide the inclusive price by 6 — £120 inc VAT contains £20 of VAT and £100 net. At 5%, divide by 21 — £210 inc VAT contains £10 of VAT and £200 net. Never take 20% of the inclusive price itself; that overstates the VAT.

Do prices in UK shops have to include VAT?

For goods sold to consumers, yes — the Price Marking Order 2004 defines the displayed selling price as the final price including VAT. Consumer offers more broadly must show the total price clearly under the Digital Markets, Competition and Consumers Act 2024.

Can I show prices excluding VAT on my website?

Only safely if the site is aimed at trade customers who can reclaim VAT, the price is clearly labelled ex VAT, and the VAT rate or amount is stated prominently. If members of the public can buy, show the VAT-inclusive price — that is the figure consumer law expects them to see.

Why do trade suppliers quote ex VAT?

Because VAT-registered business buyers can usually reclaim the VAT they are charged, so their real cost is the net price. Quoting ex VAT lets them compare suppliers on that basis — the VAT is still charged on the invoice, it just is not part of their cost comparison.

Convert any price between ex VAT and inc VAT in seconds with our free UK VAT calculator.