How to calculate VAT | GCSE

This video shows you how to work out how much VAT needs to be added to a price (excluding VAT) or how much VAT has been included in a price (including VAT). Get in touch via the comments section if you need help with this type of calculation.

Transcript:

This video is going to show you how to calculate VAT, which in the UK (where I live) is an acronym for Value Added Tax.

The video is in two parts.

In Part One I’ll show you how to calculate how much VAT needs to be added to a price. This is needed when a price excludes VAT.

And in Part Two, I’ll show you how to calculate how much VAT has been included in a price. This calculation is needed when prices are quoted as including VAT.

So let’s begin with Part One, where we’ll work out how much VAT should be added to a price.

The amount varies and is set by the Government.

For example, it could be 15%,17.5%,19 %, or as high as 20% or perhaps even higher.

In this video my calculations will be based on a VAT level of 19%, but you should be able to adapt the calculations to any value. If you need help with this you can let me know in the comments section and I’ll get back to you.

So let’s take a price, say £30, that we want to add VAT to at a rate of 19%.

The key to this calculation is understanding that 19% is equivalent to the fraction 19 over 100.

And if you divide 19 by 100 you get 0.19.

Now the original price, which was £30, can be regarded as being one whole and we need to add our VAT to this, which is 19% represented by 0.19.

So if we add these values together we get 1.19.

So if we take £30 and multiply it by 1.19 we get a new price of £35.70.

Therefore 19% VAT added to an original price of £30 is £35.70.

Part Two is about how to calculate how much VAT has already been included in a price.

This time we’ll take a price of $59.50 which already includes 19% VAT, and we want to find the original price.

As was shown in Part One, we regard the original price as being 100% or one whole and VAT has been added at a rate of 19%.

When we add these together we get 119%.

So if we take the price of $59.50 and divide this by 119 we get the value of 1%, which is 0.5.

Now it’s important to note that we described to original value, i.e. before VAT was added, as being 100%.

So if 0.5 is 1%, we take this and multiply it by 100 which gives a value of 50.

So the original price was $50 before VAT was added at a rate of 19%.

Thank you for watching my video. Please subscribe if you’d like more help with maths.

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Many thanks.