Calculate VAT in United Kingdom: types, examples and how it works

Types of VAT available in United Kingdom

• General VAT of 20%

• Reduced VAT of 5%

What is VAT in United Kingdom and how does it work?

The Value Added Tax or VAT is a tax applied to the sale of goods or services. VAT is charged throughout the production and distribution chain, ensuring that at the end, consumers are the ones who pay it.

To determine the VAT you need to consider the sale price of the product or service offered, as well as a specific percentage to obtain the final cost of the VAT. The percentage to be charged varies depending on the product or service in question, as well as the social demands affecting the countries being discussed.

Standard percentages are usually applied to the purchase of general goods and services, while reduced percentagesusually correspond to essential products or food items. For example, a smartphone may have a VAT of 20%, which would be the standard VAT; but certain selected products could have one of 5%, which would be a reduced VAT.

Basic concepts to understand VAT calculation

Calculating VAT is a simple and quick operation that can be done in a few seconds. However, not everyone knows how to add and subtract percentages for this. The mistakes made when calculating VAT are always the same, although these are easy to avoid with the right formulas.

It is essential to clarify certain points to avoid preventable mistakes when calculating the total amount of a bill. These are the facts to know to calculate VAT accurately and simply.