Gross vs Net on a UK Invoice
On a UK VAT invoice, net is the amount before VAT and gross is the total including VAT. In pay, gross is before deductions and net is take-home pay.
Updated 26 September 2026
Gross vs net at a glance
The order changes by context. On an invoice, VAT is added to the net amount; on a payslip, deductions are taken from gross pay.
UK VAT invoice
Net = before VAT
Gross = including VAT
£1,000 net + £200 VAT = £1,200 gross
Pay
Gross = before deductions
Net = take-home pay
£3,000 gross − £650 deductions = £2,350 net
Profit
Gross = after direct costs
Net = after relevant expenses
The exact presentation depends on the accounts being prepared.
Invoice formula
Net amount + VAT = gross total
At the UK standard rate, a £1,000 net charge has £200 VAT and a £1,200 gross total.
To remove 20% VAT from a gross price, divide by 1.20. Do not simply subtract 20%: £1,200 ÷ 1.20 = £1,000 net.
- Net
- £1,000
- VAT at 20%
- £200
- Gross
- £1,200
GOV.UK says invoices must show the VAT amount where applicable and the total owed. The standard VAT rate is 20%, but the correct rate depends on the goods or services. Check the official invoice requirements and VAT rates.
Gross vs net in pay
Gross pay is total earnings before deductions such as Income Tax, National Insurance and pension contributions. Net pay, also called take-home pay, is what remains after those deductions.
Gross vs net profit
Gross profit is revenue minus the direct cost of making or buying what was sold. Net profit is what remains after the relevant business expenses for the reporting period; the exact presentation depends on the accounts being prepared.
Gross payment status under CIS
Gross payment status has a separate meaning in the Construction Industry Scheme. It allows an eligible subcontractor to be paid without CIS deductions. Without gross payment status, the contractor normally applies the appropriate CIS deduction to the amount subject to the scheme.
Why the wording matters
On a quote or invoice, state clearly whether a price includes VAT. The word net changes meaning by context, so a label such as “net before VAT” or “gross including VAT” is clearer than using net or gross on its own.
Gross vs net questions
What is the difference between gross and net on an invoice?
On a UK VAT invoice, the net amount is the price before VAT. The gross amount is the total after VAT has been added, so it is normally the amount the customer pays.
Does gross include VAT?
Yes, when an invoice uses gross to describe its total, gross normally includes VAT. Check the labels because gross can have a different meaning in pay, profit and CIS contexts.
Is VAT 20% of net or gross?
For a standard-rated invoice, VAT is calculated as 20% of the net amount. To remove 20% VAT from a gross total, divide the gross amount by 1.20 rather than subtracting 20%.
What is the difference between gross and net pay in the UK?
Gross pay is earnings before deductions. Net pay, or take-home pay, is what remains after deductions such as Income Tax, National Insurance and pension contributions.
For pay, GOV.UK confirms that payslips show earnings before and after deductions. Read the official payslip guidance.
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.
Related Resources
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