How To Calculate VAT At 20 Per Cent
What does VAT stand for?
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In this video, I am going to show you how to calculate VAT. Now, currently in UK, VAT is twenty percent. It changes from time to time but at present, it is twenty percent. What does that mean? Whenever we sell something or buy something, you buy the good and that cost is excluding VAT and then you add on VAT to calculate the overall cost you are going to pay the retailer. Let's say I want to buy a new television of example and the TV was one thousand pounds. One thousand pounds excluding VAT, okay, excluding VAT. That means you are going to pay a thousand pounds for the TV but the twenty percent VAT is going to go to the government. The Value Added Tax goes to the government. So, what I have to do is increase this value by twenty percent. So, to do that, the simple way is you take the original value and you multiply by 1.2. It is really as simple as that. If you take this, you multiply by 1.2 and you are going to get twelve hundred pounds. That's including VAT. So, that is how to calculate VAT at twenty percent. Now, what I have done is multiplied by 1.2. There is a reason for that, and the reason is you take your thousand pounds and then you add on twenty percent. So, twenty percent is twenty over hundred of a thousand pounds. So, you add on thousand plus a twenty percent of a thousand, this part here goes as Value Added Tax, this point is the value of the good. This is one thousand multiplied by one plus, not point two, when you factorise it. This is one thousand times 1.2 is twelve hundred and that's the reason why you multiply it 1.2. But the simple thing is to multiply by 1.2. And that's how to calculate VAT. .