Divide first, then subtract

If a displayed total includes a 20% illustrative tax on the pre-tax price, the total is 120% of that base. Divide the inclusive total by 1.20. The tax is the difference between the total and the base. Do not take 20% of the inclusive total: that uses the wrong base. OpenStax describes tax as a percentage of purchase price.

Supply the rate explicitly

The 20% here is an arithmetic example, not a claim about the current tax on any item or in any country. Actual rates, exemptions, and rounding rules vary. If the rate or whether the price includes tax is unknown, clarify it before calculating.

The base determines the fraction

A pre-tax price of £100 plus an illustrative 20% tax becomes £120. The tax is £20, which is 20% of £100 but only one sixth of £120. Both fractions describe the same £20 from different bases. This distinction explains why multiplying an inclusive £120 by 20% produces £24 and overstates the tax. For the site calculator, ask first for the pre-tax amount from a total that includes a stated percentage; subtract that result from the total if you also want the included tax.

Do not infer a statutory rate

An invoice can contain items with different tax treatments, exemptions, or rounding rules. A single inclusive total and a single stated rate only supports the simple one-rate calculation shown here. This article does not determine whether a tax should have applied or what rate governs a transaction. If the invoice or local rule matters, use its line-item and jurisdiction information rather than treating the illustrative percentage as authority.

Try it with your numbers

Try “£120 includes 20% tax; what is the pre-tax amount?” The supported included-percentage calculation identifies the base (£100 in this illustration). Then subtract £100 from £120 to obtain the £20 tax component. Supply the rate yourself and check that one rate applies to the whole sum; the tool does not choose a tax treatment.

Try it yourself

A worked example

Separate an inclusive total

“£120 includes 20% tax. How much is the tax?”

  1. £120 ÷ 1.20 = £100 pre-tax
  2. £120 − £100 = £20 tax
£20 included taxIllustrative rate only.

Sources and further reading