Using percentages for VAT calculations
The letters VAT stand for Value Added Tax. This is a tax added on to the price of lots of the things that you can buy.
Most shops include VAT in their prices. So the price you see on the label is the total of what you pay.
Other shops and services do not include VAT in their price. You have to calculate the VAT and then add it on to get the final price you have to pay.
The current rate of VAT is \(20\%\).
Try the example question below.
Question
Mr and Mrs MacDonald buy a new stereo from their local wholesalers.
The price on the label is \(£300\), but they know they have to add VAT onto this price.
How much would Mr and Mrs MacDonald have to pay for the stereo?
VAT is \(20\%\) of \(\pounds300\).
\(= \frac{{20}}{{100}} \times 300\)
\(= \pounds60\)
So the total cost of the stereo would be \(\pounds300 + \pounds60 = \pounds360\).
