Gross vs Net: What Is the Difference?
Gross refers to the total amount before any deductions, while net is the amount remaining after deductions such as tax, discounts, or expenses.
Reviewed by Anna Moore on 18 August 2026
Gross vs net at a glance
| Context | Gross | Net | Worked example |
|---|---|---|---|
| UK VAT invoice | Total including VAT | Amount before VAT | £1,000 net + £200 VAT = £1,200 gross |
| Pay | Earnings before deductions | Take-home pay after deductions | £3,000 gross - £650 deductions = £2,350 net |
| Profit | Revenue minus direct cost of sales | Profit after the relevant business expenses | £100 sale - £40 materials = £60 gross profit |
The meaning changes with context, so label figures clearly. Check the official GOV.UK invoice requirements and use the profit margin calculator or CIS invoicing guide for the next step.
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 the relevant costs and expenses for the reporting period; the exact presentation depends on the accounts being prepared
- **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.
Examples
An invoice shows a net amount of £1,000, plus VAT of £200, giving a gross total of £1,200
A subcontractor with CIS gross payment status receives the full invoice amount without deductions
A business reports gross profit of £80,000 but net profit of £45,000 after overheads and tax
Related Terms
CIS (Construction Industry Scheme)
CIS is a UK tax scheme where contractors deduct money from subcontractor payments and pass it to HMRC as advance tax payments.
Margin vs Markup
Margin is profit expressed as a percentage of the selling price, while markup is profit expressed as a percentage of the cost price.
Invoice
An invoice is a commercial document issued by a seller to a buyer, listing the products or services provided and requesting payment.
Flat Rate VAT Scheme
The Flat Rate VAT Scheme lets eligible small businesses pay a fixed percentage of gross turnover as VAT, simplifying their VAT accounting.