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MONEY & FINANCE · LESSON 04

Discounts and VAT

Calculate sale prices, tax and original values from financial information.

⏱️ 20–24 min 📘 Developing 💼 Real-life examples included

Learning Objectives

Introduction

This lesson develops Discounts and VAT from meaning and patterns before moving to calculations. Look for what the quantities, shapes or symbols represent, then connect that idea to the method.

Key Notes

Read the definitions and key facts below carefully. Each rule is most useful when you can explain why it fits the situation, not simply recall it.

🛒 Interactive Checkout

Apply a discount first, then VAT. The order matters.

Discount amount
After discount
VAT amount
Final price

Price journey

Marked price
After discount
Final with VAT
$0$500$1,000$1,500$2,000+
Use multipliers in an exam: after a 20% discount, multiply by 0.80; after adding 15% VAT, multiply by 1.15.

🌍 Where Will You Use This?

Discounts and VAT appear on receipts, invoices, advertisements and online shopping pages. Understanding them helps you check whether a price is truly a bargain.

Discounts

Discount = Discount rate × Marked price
Sale price = Marked price − Discount

A jacket marked US$80 is discounted by 25%.

1

Discount = 0.25 × 80 = US$20.

2

Sale price = 80 − 20 = US$60.

Using a Multiplier

After a 25% discount, 75% of the original price remains.

Sale price = Original price × 0.75
Multiplier method is usually faster when only the final price is required.

Successive Discounts

A product receives discounts of 20% and then 10%.

1

First multiplier = 0.80.

2

Second multiplier = 0.90.

3

Combined multiplier = 0.80 × 0.90 = 0.72.

4

Equivalent discount = 28%, not 30%.

VAT

VAT is a tax added to the price of certain goods and services.

VAT amount = VAT rate × price before VAT
VAT-inclusive price = price before VAT × (1 + VAT rate)

A service costs US$200 before VAT. VAT is 15%.

1

VAT = 0.15 × 200 = US$30.

2

Total = 200 + 30 = US$230.

Finding the Price Before VAT

A VAT-inclusive price is US$230 at 15% VAT.

1

Inclusive multiplier = 1.15.

2

Price before VAT = 230 ÷ 1.15 = US$200.

Receipt Example

SubtotalUS$120.00
Discount 10%−US$12.00
Net before VATUS$108.00
VAT 15%+US$16.20
TotalUS$124.20

💼 Money Smart Tip

Always check whether VAT is already included and whether a discount is applied before or after tax.

⚠️ Common Mistakes

Do not add successive discount percentages directly. Also, do not divide a VAT-inclusive price by the VAT percentage alone—divide by the full multiplier such as 1.15.

🧠 Let’s Think Together

Before calculating, identify the information given, the result required and the mathematical relationship that connects them. Predict whether the answer should be larger, smaller or unchanged, then use that prediction to check the result.

Worked Examples

Reason through the method

  1. Identify the known information and what must be found.
  2. Choose the definition, property or formula that connects them.
  3. Substitute carefully and show each step.
  4. Check the notation, units and whether the result is sensible.

Practice Questions

Foundation
  1. Find the sale price of US$150 after a 20% discount.
  2. Find 15% VAT on US$320.
  3. Find the VAT-inclusive price of US$480 at 15% VAT.
Developing
  1. A US$250 item receives discounts of 10% then 20%. Find the final price.
  2. A VAT-inclusive amount is US$575 at 15% VAT. Find the price before VAT.
  3. A US$400 item is discounted by 12%, then VAT of 15% is added. Find the final amount.
Challenge
  1. After a 25% discount and then 15% VAT, an item costs US$258.75. Find its original marked price.

✅ Check Your Work

Show practice answers
  1. US$120.
  2. US$48.
  3. US$552.
  4. 250×0.90×0.80 = US$180.
  5. 575÷1.15 = US$500.
  6. 400×0.88×1.15 = US$404.80.
  7. Original ×0.75×1.15 = 258.75.
    Original = 258.75÷0.8625 = US$300.

Exam Focus

Show the mathematical relationship you are using, keep notation consistent and give a clear final answer. Use a quick estimate, diagram or inverse operation to check that the result is reasonable.

Summary