How deals work
How a discount is actually calculated
A percentage is only worth the price it comes from. The arithmetic of was-and-now pricing, stacked reductions, and what the ASA asks of a reference price.
Every price reduction is two numbers pretending to be one. There is the price you pay, which is a fact, and there is the price the reduction is measured from, which is a claim. The percentage on the banner is produced by dividing one by the other, and it inherits whatever is wrong with the second number.
This guide does that arithmetic in the open: how the subtraction works, why successive reductions do not add up, what the Advertising Standards Authority requires before a saving may be advertised, and where VAT sits inside the figure. No live prices are connected to this site, so every money figure below is an example used to show a calculation.
The reduction is a subtraction, and the reference price is the question
Take an example item advertised at "was £50, now £35". The saving is £50 minus £35, which is £15, and the percentage is £15 divided by £50, which is 30%. That arithmetic is not in doubt. What is in doubt is whether £50 was ever the price at which the item actually sold.
The Advertising Standards Authority is explicit about this. Its guidance on promotional savings claims states that marketers must ensure any reference price used to advertise a saving represents a genuine established usual selling price and does not mislead. The relevant rule in the CAP Code is rule 3.39, which covers claiming a price advantage that does not exist.
So the first question to ask of any reduction is not "how big is the percentage" but "what evidence is there that the higher number was a real selling price". A 30% reduction from a price nobody paid is a 0% reduction with a decoration on it.
| Reference price | Reduced price | Saving | Percentage |
|---|---|---|---|
| £20 | £14 | £6 | 30% |
| £50 | £35 | £15 | 30% |
| £120 | £84 | £36 | 30% |
| £250 | £175 | £75 | 30% |
Every row is reference price multiplied by 0.7. The percentage is identical in all four; the amount of money in your pocket is not. Put your own two prices into the discount-truth calculator on this site to see both at once.
Reductions do not add up
"20% off, plus a further 20% at checkout" is not 40% off. The second reduction applies to the already-reduced price, not to the original. On an example £50 item, 20% off gives £40, and a further 20% off £40 gives £32. That is £18 off £50, which is 36%.
The gap widens as the headline percentages grow further apart and narrows when one of them is small. The general form is simple: multiply the fractions you keep rather than adding the fractions you save. Keeping 80% then keeping 80% leaves 0.8 times 0.8, which is 0.64, so 36% comes off.
This matters most at checkout, where a code is applied to a basket that is already reduced. The figure to compare against another seller is the number on the payment screen, computed once, and not the sum of the two percentages you were shown on the way there.
| Advertised as | After first reduction | After second | Actual total reduction |
|---|---|---|---|
| 10% off, then 10% more | £45.00 | £40.50 | 19% |
| 20% off, then 20% more | £40.00 | £32.00 | 36% |
| 30% off, then 10% more | £35.00 | £31.50 | 37% |
| 50% off, then 20% more | £25.00 | £20.00 | 60% |
Each final column is one minus the product of the fractions kept. The first row saves 19%, not 20%; the second saves 36%, not 40%.
What a "was" price has to be before it may be advertised
The ASA sets out what it expects a marketer to be able to show. It expects advertisers to provide at least three months of pricing history, including information about how long the product was sold at any intervening prices, in order to assess the usual selling price. Without that evidence, the ASA may consider a savings claim to be misleading.
Two further tests sit alongside the three months. Generally the higher reference price should have been charged for a longer duration than the promotional price. And the ASA may consider the number of sales made at the reference price: a marketer should be able to demonstrate either that a significant number of sales were made at that price, or that the higher price was a realistic selling price.
The Competition and Markets Authority covers the same ground from the enforcement side. Its guidance on unfair commercial practices, CMA207, was published on 4 April 2025 and updated on 18 November 2025, and it sets out the CMA's approach to the protection from unfair trading provisions of the Digital Markets, Competition and Consumers Act 2024. Misleading reference pricing falls under those provisions.
- At least 3 months of pricing history is the evidence the ASA expects to see behind a savings claim
- That history must include how long the item sold at any intervening prices, not only the highest and lowest
- The higher reference price should generally have been charged for longer than the promotional price
- The ASA may weigh the number of sales actually made at the reference price
- CAP Code rule 3.39 is the rule a misleading savings claim breaches
- CMA207, published 4 April 2025 and updated 18 November 2025, is the enforcement guidance on unfair commercial practices
VAT is already inside both numbers
Consumer prices in the United Kingdom include VAT, and the standard rate is 20%, applied since 4 January 2011. A reduction therefore takes the tax down with it rather than being applied on top of it. An example £50 shelf price contains £8.33 of VAT, because £50 divided by 1.2 is £41.67 and the difference is £8.33.
After a 30% reduction to £35, the VAT inside is £5.83, by the same division. Nothing about the reduction changes the rate or who pays it; the seller simply collects less tax because the price is lower. That is worth knowing because "plus VAT" wording on a consumer offer is a sign you are reading a trade price, not a retail one.
The figure to carry into any comparison is the VAT-inclusive total. A quoted £29.17 excluding VAT and a shelf price of £35 are the same amount of money, and only one of them is what you will be charged.
| Stage | Price paid | Net of VAT | VAT at 20% |
|---|---|---|---|
| Reference price | £50.00 | £41.67 | £8.33 |
| Reduced price | £35.00 | £29.17 | £5.83 |
| Difference | £15.00 | £12.50 | £2.50 |
Net figures are the price divided by 1.2; the VAT column is the remainder. The 30% reduction falls equally on the net price and the tax.
What to write down before you buy
The arithmetic above collapses into a short routine. Write down the price you would actually pay, including delivery and any unavoidable fee, at every seller you are comparing. Then, separately, write down what you believe the item's usual price to be and where that belief came from.
Those two numbers answer different questions. The first tells you which seller is cheapest today. The second tells you whether today is a good day to buy at all. A banner percentage answers neither, because it is the ratio between a number you can verify and a number you generally cannot.
If the second number is a guess, the honest move is to treat the offer as a price rather than as a saving: at £35 delivered, would you buy this item on its merits? That question has an answer that does not depend on anybody's reference price.
Before you buy
- Write down the price you would actually pay at each seller, delivery and unavoidable fees included
- Multiply the fractions you keep rather than adding the percentages you save
- Treat a reference price as a claim that needs evidence, not as a fact
- Look for how long the higher price was charged, not only that it existed
- Remember the shelf price already includes 20% VAT, so a reduction takes the tax down with it
- Ask whether you would buy the item at the reduced price if no saving were advertised
- Put both numbers into the discount-truth calculator rather than trusting the banner percentage
Questions readers ask
- Is "up to 70% off" a meaningful claim?
- It describes the best case in a range, so it tells you about one line in the sale and nothing about the item you want. The useful reading is the floor rather than the ceiling: if a single product is reduced 70% and most are reduced 10%, the claim is still literally true. Work from the individual item's two prices instead.
- Why does a 30% reduction feel smaller than a 30% increase?
- Because the two percentages are taken from different bases. Going from £50 to £35 is 30% off £50. Going back from £35 to £50 is a rise of £15 on a base of £35, which is 42.9%. The same £15 is a different percentage depending on which number you divide by, which is exactly why the reference price matters.
- Does a recommended retail price count as a reference price?
- Only if it reflects what the item genuinely sells for. The ASA's test is whether the reference price is a genuine established usual selling price supported by pricing history, not whether a figure was printed somewhere. A manufacturer's suggested figure that no seller has charged for months does not meet that test, however official it looks.
- Can two sellers both be telling the truth with different percentages?
- Yes, and it happens constantly. One may have held £50 for months and reduced to £35, a true 30%. Another may have held £42 and reduced to £35, a true 17%. Both reductions are honest and both final prices are identical. Comparing the percentages ranks the sellers' price histories, not their offers.
Sources
- Advertising Standards Authority — Promotional savings claims (reference prices, three months of pricing history, CAP Code rule 3.39) — checked 2026-11-03
- GOV.UK — Unfair commercial practices (CMA207), published 4 April 2025, updated 18 November 2025 — checked 2026-11-03
- GOV.UK — VAT rates on different goods and services (20% standard rate since 4 January 2011) — checked 2026-11-03
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