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Why doesn't tax work out at 20% ?


Graham1030
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Hi,

 

I am in the UK and have set my VAT tax to 20%. But when i view my tax figures it doesn't work out to 20%. The example in the picture i have attached works out to about 16%, am i doing something wrong here? It's really confusing me, surely if it is working out 20% tax then the figures in the picture should work out to be 20%

Why doesn't tax work out at 20% ?

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Hello,

Perhaps you are using an "included to the price tax"? in this case the calculations can be different as follows:

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In the case of ‘included in the price’ tax, the item price consists of pre-tax price value plus the tax value.
Price = PretaxPrice + Tax  
And the tax will be applied to the pre-tax price.
To calculate the item's pre-tax price, divide the price by 1 + the tax rate in decimal form. To find the value of the tax that is included in the item’s price, you have to subtract the pre-tax price from the item price.
For example, if the tax rate is 6%, divide the item’s price by 1.06. So if the item is $20 with the ‘included in the price’ tax, then the value of the pre-tax price is 20/1.06 = $18.87 (rounded), and the value of the ‘included in the price’ tax is 20-18.87=$1.13.

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You can also refer to the below link for more information about how each type of taxes is calculated

https://help.loyverse.com/help/how-taxes-are-calculated

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