What is Gross vs Net?

Gross and net are fundamental financial terms that describe amounts before and after deductions. The distinction appears throughout invoicing, payroll, profit calculations, and tax.

Gross vs net on invoices: - Gross amount = total before deductions (sometimes also used to mean the amount including VAT) - Net amount = amount after deductions (or the amount excluding VAT) - Confusingly, "net" on a UK VAT invoice typically means the amount before VAT, while "gross" means the total including VAT

• **Gross vs net in pay:**
• Gross pay: = total earnings before tax, National Insurance, pension, and other deductions
• Net pay: (take-home pay) = what lands in your bank account after all deductions

• **Gross vs net profit:**
• Gross profit: = revenue minus cost of goods sold (COGS)
• Net profit: = revenue minus ALL expenses (COGS, overheads, tax, interest, etc.)

• **In the construction industry (CIS):**
• Gross payment status: means the contractor pays you the full amount with **no CIS deductions**
• Without gross status, the contractor deducts **20% or 30%** from the labour element

Why it matters for invoicing: When quoting or agreeing prices, always clarify whether amounts are gross or net of VAT. Misunderstandings about whether a quoted price includes VAT are one of the most common causes of invoice disputes in the UK.