Two prices for the same thing can both be correct: £120 including VAT and £100 plus VAT describe exactly the same sale at the 20% rate. The difference is whether the VAT has already been added. Mixing the two up is one of the most common reasons quotes, invoices and expense claims come out wrong.
In short: a VAT-inclusive price (also written "inc VAT" or "gross") already contains the VAT. A VAT-exclusive price ("ex VAT", "plus VAT", "+VAT" or "net") does not — the VAT is added on top.
What VAT inclusive means
A VAT-inclusive price is the total the customer actually pays. The VAT is already inside it. When you buy a coffee, a pair of shoes or a train ticket, the price on the shelf or the website is VAT inclusive.
At the 20% standard rate, one sixth of any VAT-inclusive price is VAT. So in a £60 price, £10 is VAT and £50 is the business's actual income from the sale.
What VAT exclusive means
A VAT-exclusive price is the price before VAT. The customer pays this amount plus VAT at the relevant rate. Business-to-business suppliers — wholesalers, trades, agencies, consultants — usually quote this way, because their customers are normally VAT registered and reclaim the VAT anyway, so the net figure is the one that matters to them.
A quote of £500 + VAT at 20% means the customer will pay £600 in total: £500 for the work and £100 VAT.
Side-by-side comparison
| VAT inclusive | VAT exclusive | |
|---|---|---|
| Also written as | inc VAT, incl. VAT, gross | ex VAT, excl. VAT, + VAT, net |
| Contains VAT? | Yes, already added | No, added on top |
| What the customer pays | The price shown | The price shown plus VAT |
| Usually used for | Selling to the public | Selling to other businesses |
| £100 net item at 20% | £120.00 | £100.00 + VAT |
When UK prices must include VAT
If you sell to consumers — the general public — the price you show must be the full price they will pay, including VAT. That applies to shelf labels, menus, websites and adverts. The rules come from UK consumer protection law, which requires traders to show the total price, including taxes, so consumers aren't misled.
Business-to-business prices can be shown excluding VAT, as long as it is clear that VAT will be added. That's why trade catalogues and B2B websites often have an "inc VAT / ex VAT" switch.
Tip: if your customers are a mix of the public and businesses, show the VAT-inclusive price prominently and the VAT-exclusive price as a secondary figure. That keeps you within the rules for consumers and still gives trade customers the number they want.
How to convert between the two
From VAT exclusive to VAT inclusive (adding VAT)
Multiply by 1 plus the VAT rate:
- At 20%: net × 1.2
- At 5%: net × 1.05
Example: £85 ex VAT × 1.2 = £102 inc VAT. For the full method, see how to add VAT to a price.
From VAT inclusive to VAT exclusive (removing VAT)
Divide by 1 plus the VAT rate:
- At 20%: gross ÷ 1.2
- At 5%: gross ÷ 1.05
Example: £102 inc VAT ÷ 1.2 = £85 ex VAT.
The mistake to avoid
Never take 20% off a VAT-inclusive price to find the ex-VAT figure. £120 minus 20% is £96, but the right answer is £100. The VAT was 20% of the smaller, net figure — not of the total — so you have to divide. Our guide to working out VAT backwards explains why in more detail.
Worked examples
| VAT exclusive | VAT rate | VAT | VAT inclusive |
|---|---|---|---|
| £10.00 | 20% | £2.00 | £12.00 |
| £41.66 | 20% | £8.33 | £49.99 |
| £250.00 | 20% | £50.00 | £300.00 |
| £1,000.00 | 5% | £50.00 | £1,050.00 |
| £35.00 | 0% | £0.00 | £35.00 |
Notice the last row: at the 0% zero rate, the inclusive and exclusive prices are the same.
Which price should I use?
As a buyer
If you are not VAT registered, only the VAT-inclusive price matters — that's what leaves your bank account. If you are VAT registered and buying for your business, compare suppliers on the VAT-exclusive price, because you'll usually reclaim the VAT.
As a seller
- Selling to the public: show VAT-inclusive prices.
- Selling to businesses: VAT-exclusive prices are normal, but always write "+ VAT" or "excl. VAT" so nobody is surprised.
- Not VAT registered: don't add VAT or use "+ VAT" at all. You can't charge VAT unless you are registered.
- Working out your margin: always use the VAT-exclusive figures. The VAT isn't your money.
How prices appear on a VAT invoice
A full VAT invoice shows both. Each line shows the price excluding VAT and the VAT rate, and the totals show the amount excluding VAT, the VAT and the amount due. Our guide to what a VAT invoice must include has the full list.
Frequently asked questions
Does "net" always mean excluding VAT?
In a VAT context, yes. But "net" can also mean after discounts or after costs in other contexts, so if there's any doubt, ask whether a figure includes VAT.
Is "ex VAT" the same as "VAT exempt"?
No. "Ex VAT" means the VAT hasn't been added yet. "VAT exempt" means no VAT applies to that item at all, such as most insurance.
Why does my VAT-inclusive price end in an odd penny after I convert it?
Because VAT is rounded to the nearest penny. If you want a neat shelf price like £49.99, set that as the VAT-inclusive price and work backwards to the net figure, rather than the other way round.
Check your figures
The VAT Calculator converts in both directions: choose Add VAT to go from exclusive to inclusive, or Remove VAT to go the other way. It shows the working for every result.
Official source: GOV.UK: VAT rates.