Tax
Prices with or without tax: quoting and invoicing VAT, GST and sales tax
When to quote a price including tax and when to quote it before tax, how to work one out from the other without the common mistake, and how to show it on the invoice.
28 Oct 2026 · 7 min read
Priya quotes a café in Leeds “£1,200 for the menu design”. She is VAT registered, and when the invoice arrives for £1,440 the owner is surprised: he thought £1,200 was the price. Priya meant £1,200 plus VAT. Both readings were reasonable. One word on the quote, “plus VAT” or “including VAT”, would have settled it before it became a £240 argument.
Two ways to state a price
- Exclusive of tax (net, before tax, “plus VAT”): the tax is added on top. £1,200 + 20% VAT = £1,440.
- Inclusive of tax (gross, “including GST”): the tax is already in the price. £1,200 including VAT is £1,000 + £200 VAT.
Either is fine. What matters is that the customer knows which one they are reading. The tax itself is the same rate either way: only the starting point changes.
Which one to quote
| Who you are selling to | What they usually expect |
|---|---|
| Shoppers in the UK, the EU, Australia, New Zealand, India, Japan | Price including tax. Consumer rules in these places generally require the price shown to be the price paid. |
| Shoppers in the US and Canada | Price before tax. Sales tax, GST or HST is added at the till, at the rate where the sale happens. |
| Business customers almost everywhere | Price before tax. A registered business usually claims the tax back, so the net figure is the one they compare. |
If you sell to both, the safest habit is to write both: “£1,000 + VAT (£1,200 including VAT)”. Rules on how prices must be shown to consumers differ by country, so check your consumer protection or trading standards body if you sell to the public.
Working one out from the other
From a net price to the total, multiply by one plus the rate:
- €500 at 19% German VAT: €500 × 1.19 = €595.
From a price that includes tax back to the net price, divide by one plus the rate:
- A$550 including 10% GST: A$550 ÷ 1.10 = A$500 net, so A$50 is GST.
| Rate | Net to total | Total to net | Example |
|---|---|---|---|
| 5% | × 1.05 | ÷ 1.05 | AED 1,050 incl. is AED 1,000 + AED 50 |
| 10% | × 1.10 | ÷ 1.10 (tax is 1/11) | A$1,100 incl. is A$1,000 + A$100 |
| 15% | × 1.15 | ÷ 1.15 (tax is 3/23) | NZ$1,150 incl. is NZ$1,000 + NZ$150 |
| 18% | × 1.18 | ÷ 1.18 (tax is 18/118) | ₹11,800 incl. is ₹10,000 + ₹1,800 |
| 19% | × 1.19 | ÷ 1.19 | €1,190 incl. is €1,000 + €190 |
| 20% | × 1.20 | ÷ 1.20 (tax is 1/6) | £1,200 incl. is £1,000 + £200 |
The rates in the table are examples of rates in use at the time of writing. Rates change, and many countries have more than one, so check the rate for what you sell with your tax office.
The mistake nearly everyone makes once
To find the VAT in £120, it is tempting to take 20% of £120: £24, leaving £96. That is wrong. The 20% was worked out on the net price, not on the total, so you have to divide: £120 ÷ 1.20 = £100, and the VAT is £20. Check it the other way: 20% of £100 is £20, and £100 + £20 = £120. Taking the rate off the total always gives too little net and too much tax.
What goes on the invoice
However you quoted, a tax invoice to a business normally shows three figures: the net amount, the tax with its rate, and the total. That is what lets your customer claim back the tax. If you priced including tax, work the net and the tax out of each price, line by line, and say so on the invoice: “Prices include VAT.”
- Each line: description, quantity, price, the tax rate.
- Under the lines: net total, tax for each rate, total to pay.
- If prices included tax: a short line saying so, so nobody adds it again.
When you work tax out of an inclusive price, the cents do not always come out even, and the tax may differ by a cent from what a calculator shows on the total. That is normal. See rounding on invoices.
When you are not registered
If you are not registered for VAT, GST or sales tax, there is nothing to include or exclude. Your price is your price. Do not write “including VAT” on it, since that suggests you charge tax you are not collecting. When you register later, decide whether your prices go up by the tax or stay the same with the tax inside them, and tell your regular customers before the first new invoice.
Discounts and inclusive prices
Apply the discount to the price, then work out the tax on what is left. A 10% discount on £1,200 including VAT gives £1,080 including VAT, which is £900 net and £180 VAT. Doing it in a different order gives a different answer. Our post on discounts on an invoice has the full order.
The short version
- Always say whether a price includes tax or not. “Plus VAT” or “including GST” is enough.
- Consumers in most of the world expect prices including tax. Businesses, and shoppers in the US and Canada, expect them before tax.
- Net to total: multiply by one plus the rate. Total to net: divide by it.
- Never take the rate off the total. 20% off £120 is not the VAT in it.
- The invoice shows the net, the tax and its rate, and the total, whichever way you priced.