ToolSahla, Tools Sahla

If the VAT rate changes, how do I recalculate my tax-inclusive prices?

In two steps: extract the net price from each tax-inclusive price at the old rate, then add the new rate to that net price. For example, 105 with 5 entered as the old rate gives 100 net, and 100 with 15 entered as the new rate gives 115. Both rates are whatever the authority announces and you type in.

Published · 2 min read

The shortcut that gives wrong figures

When a rate goes from 5 to 15, adding 10% to every price feels logical. Try it on 105: a 10% increase gives 115.5, while the right answer is 115. The reason is that 105 is not the net price; it is the net plus the old tax, so the increase is also charged on the old tax.

The gap looks small on one item, but it repeats across every product in your store, which means either charging customers more tax than you should or showing a price that does not match your invoice.

The right way, on an awkward price

  1. In the VAT calculator, choose Extract tax from a gross amount and enter the current price of 69 with the old rate of 5. Net: 65.71.
  2. Switch to Add tax to a net amount and enter 65.71 with the new rate of 15. Tax 9.86, new gross 75.57.

The shortcut would have given 75.90 by adding 10% to 69, a gap of 33 cents on a single product.

What to do with a price like 75.57

The new price rarely lands on a tidy number. You have two options, and the choice is commercial rather than a tax question:

  • Round up to something like 79 and your net income rises slightly. Check it by extracting tax from 79 at the new rate.
  • Round down to something like 75 and you absorb part of the increase. Extract tax from 75 to see how much net you give up.

If you would rather reprice from scratch, find the net price that hits your margin in the Selling-price calculator and add the new rate to it.

Tips for updating a whole list

  • Keep a net price column in your product sheet; with it, you never need the first step again.
  • Test three products in the calculator before applying any formula to the whole sheet.
  • Check the effective date of the new rate and any transition rules for invoices with your accountant; those are not arithmetic.

Common questions

Does the calculator know the rate has changed?

No. It stores no rate at all and only uses what you type each time.

What if the rate goes down instead of up?

Same method: extract at the old rate, then add the new, lower rate.