Last reviewed: 30 July 2026
Submitting a VAT return may appear complicated when a business first becomes VAT registered. However, the process becomes much easier when sales, purchases and VAT invoices are recorded accurately throughout each accounting period.
A VAT return tells HM Revenue and Customs how much VAT a business has charged customers, how much eligible VAT it has paid on business purchases, and whether the difference must be paid to HMRC or reclaimed.
Most VAT-registered businesses must keep digital records and submit their returns through Making Tax Digital-compatible software. They must normally file a return every three months, although some businesses use monthly or annual accounting arrangements.
Quick answer: A business submits its VAT return by checking its digital VAT records, calculating output and input VAT, reviewing the nine return boxes, authorising compatible software to connect with HMRC, submitting the return and paying any amount due by the deadline.
What Is a VAT Return?
A VAT return is a summary of VAT-related business activity during a defined accounting period. It records:
- VAT charged on sales and other taxable supplies
- VAT that may be reclaimed on eligible business purchases
- Total sales excluding VAT
- Total purchases excluding VAT
- Relevant imports, exports and reverse-charge transactions
- The net amount payable to HMRC or repayable to the business
VAT charged to customers is generally known as output VAT, while eligible VAT paid to suppliers is known as input VAT. When output VAT is higher, the business normally pays the difference to HMRC. When recoverable input VAT is higher, the business may receive a repayment.
Businesses that need a broader explanation of the tax can review how the current UK VAT rates apply to different transactions.
Who Has to Submit a VAT Return?
Every VAT-registered business normally has to submit a return for each assigned accounting period. This applies even when:
- The business made no sales
- No VAT was charged
- No VAT can be reclaimed
- The amount payable is £0
- The business expects a VAT refund
A nil return must therefore still be submitted when there is nothing to pay or reclaim.
Businesses that are unsure about their status can learn how to check whether a company is registered for VAT.
When Must a Business Register for VAT?
A business must generally register when its VAT-taxable turnover for the previous rolling 12 months exceeds £90,000. Registration may also be required when the business expects its taxable turnover to exceed £90,000 within the next 30 days.
Taxable turnover includes the value of supplies that are standard-rated, reduced-rated or zero-rated. It does not normally include VAT-exempt supplies.
Businesses below the compulsory threshold may choose voluntary registration, potentially allowing them to reclaim eligible VAT on business expenses. However, voluntary registration also creates ongoing record-keeping, invoicing and filing responsibilities. HMRC’s VAT registration service explains the compulsory and voluntary registration rules.
A step-by-step explanation of becoming VAT registered can help new businesses prepare before their first return becomes due.
What Is Making Tax Digital for VAT?
Making Tax Digital for VAT requires VAT-registered businesses to maintain specified records digitally and submit VAT returns using functional compatible software.
Businesses cannot normally prepare their quarterly or monthly figures and manually enter them through the traditional VAT online account. Instead, the return must be generated and transmitted through software connected to HMRC.
Compatible options include:
- Full accounting or bookkeeping software
- Dedicated VAT return software
- Spreadsheet-based systems connected through bridging software
- Software used by an accountant or tax agent
HMRC maintains a searchable list of software compatible with Making Tax Digital for VAT. Businesses using spreadsheets may continue to do so, but bridging software and appropriate digital links are normally needed to transmit the return.
More detail about the wider digital tax system is available in the explanation of what Making Tax Digital means for UK businesses.
What Counts as a Digital Link?
When information moves between programs that form part of the business’s digital VAT records, it must normally be transferred electronically.
Acceptable digital links can include:
- Linked spreadsheet cells
- CSV or XML imports and exports
- Automated software integrations
- Application programming interfaces
- Importing a spreadsheet into another software package
- Electronic transfer of digital data to an accountant
Manually copying figures between programs or using copy and paste is not normally considered an acceptable digital link under the Making Tax Digital rules.
Can a Business Be Exempt From Making Tax Digital?
An exemption may be available when it is not reasonable or practical for a person to use computers, software or the internet. HMRC may consider circumstances involving age, disability, health, religious beliefs, location or lack of internet access.
Businesses subject to certain insolvency procedures and businesses submitting a final return after cancelling their VAT registration may already be exempt. An application should be made directly to HMRC where approval is required.
What Should Be Prepared Before Filing?
Before starting the submission, the business should confirm that it has:
- An active VAT registration number
- Access to compatible accounting or bridging software
- The correct VAT accounting period
- Complete sales invoices and credit notes
- Valid purchase invoices supporting input VAT claims
- Import VAT statements or certificates, where relevant
- Records of exports and zero-rated sales
- Details of reverse-charge transactions
- Any partial exemption or scheme calculations
- Enough money available to pay the expected liability
Good bookkeeping for a small business makes this preparation significantly easier. Transactions should be reconciled regularly instead of being collected immediately before the deadline.
What VAT Records Must Be Kept?
Digital VAT records will usually need to contain details such as:
- Business name, address and VAT number
- VAT accounting schemes used
- Dates and values of supplies
- VAT rates applied
- Output VAT charged
- Input VAT claimed
- Adjustments, credit notes and corrections
- Reverse-charge transactions
- Imports and exports
Supporting documents may include sales invoices, purchase invoices, bank records, import statements, credit notes and evidence supporting zero-rating.
VAT records generally have to be retained for at least six years. Businesses using the VAT One Stop Shop or former Mini One Stop Shop arrangements may have longer record-retention requirements.
How Do You Calculate a VAT Return?
The basic calculation compares output VAT with recoverable input VAT.
Step 1: Calculate Output VAT
Output VAT is the VAT charged on taxable sales and other relevant business transactions during the VAT period.
The correct VAT rate must be applied to each supply. The main UK rates are:
| VAT treatment | Rate | General meaning |
| Standard rate | 20% | Applies to most taxable goods and services |
| Reduced rate | 5% | Applies to qualifying goods and services |
| Zero rate | 0% | Taxable supplies charged at 0% |
| Exempt | No VAT charged | Different from zero-rated supplies |
| Outside scope | Not within UK VAT | Not treated as a UK taxable supply |
The VAT treatment of a sale should be checked rather than assumed, particularly where a business sells food, property, financial services, digital products, international services or mixed supplies. HMRC publishes the official VAT rates and classifications.
Step 2: Calculate Recoverable Input VAT
Input VAT is VAT paid on eligible goods and services used for the business.
A valid VAT invoice is normally required to support a claim. VAT cannot automatically be reclaimed merely because an expense appears in the accounting records.
Restrictions can apply to:
- Personal or non-business expenditure
- Business entertainment
- Cars and motoring costs
- Purchases connected with exempt supplies
- Goods bought under certain margin schemes
- Expenses with both private and business use
- Missing or invalid VAT invoices
Partly exempt businesses may need to restrict their claims using a partial exemption calculation.
Step 3: Calculate the Net Position
The basic calculation is:
Output VAT − recoverable input VAT = VAT payable or repayable
For example:
| Calculation | Amount |
| Output VAT charged | £12,000 |
| Recoverable input VAT | £7,500 |
| VAT payable to HMRC | £4,500 |
If the business instead had £12,000 of output VAT and £14,000 of recoverable input VAT, its return would show a potential £2,000 repayment.
Businesses calculating VAT-inclusive or VAT-exclusive prices may also find the explanation of how to take VAT off a price useful.
VAT return estimate
VAT Return Estimate Calculator
Estimate the output VAT charged on sales, recoverable input VAT paid on eligible purchases and the potential amount payable to, or reclaimable from, HMRC.
Enter Your VAT Period Figures
Enter VAT-exclusive figures from the accounting period covered by the return.
Estimated calculation
Your VAT Position
Enter the VAT-period figures above to calculate an estimated position.
Calculation breakdown
- VAT charged on sales £0.00
- Additional VAT due £0.00
- Total VAT due £0.00
- Recoverable VAT on purchases £0.00
- Additional recoverable VAT £0.00
- Total VAT reclaimable £0.00
- Estimated net position £0.00
Official references: HMRC VAT return instructions , current VAT rates and Making Tax Digital-compatible software .
What Goes Into the Nine VAT Return Boxes?
Compatible software often populates these fields automatically, but the business remains responsible for checking that the figures are accurate.
| Box | Information entered |
| 1 | VAT due on sales and other outputs |
| 2 | VAT due on eligible acquisitions of goods into Northern Ireland from EU member states |
| 3 | Total VAT due, calculated by adding Boxes 1 and 2 |
| 4 | VAT reclaimed on eligible purchases and other inputs |
| 5 | Net VAT payable to HMRC or reclaimable from HMRC |
| 6 | Total value of sales and other outputs, excluding VAT |
| 7 | Total value of purchases and other inputs, excluding VAT |
| 8 | Relevant supplies of goods from Northern Ireland to EU member states, excluding VAT |
| 9 | Relevant acquisitions of goods into Northern Ireland from EU member states, excluding VAT |
Boxes 8 and 9 will not apply to many businesses in England, Scotland or Wales. They are primarily relevant to specified movements of goods involving Northern Ireland and EU member states.
Special rules can also affect the boxes used for imports, postponed VAT accounting, reverse charges, margin schemes and the Flat Rate Scheme. HMRC’s box-by-box VAT return instructions should be checked when a transaction falls outside ordinary domestic sales and purchases.
How Do You Submit a VAT Return Online?
1. Close the Accounting Period
Confirm the beginning and end dates shown for the return. Businesses should not assume their periods end in March, June, September and December because HMRC may assign a different quarterly stagger.
The relevant dates and submission status can be checked through the business’s VAT online account.
2. Complete the Bookkeeping
Record all sales, purchases, credit notes, refunds, imports and adjustments for the period. Reconcile:
- Sales records against customer invoices
- Purchase records against supplier invoices
- Bank transactions against the bookkeeping system
- VAT control accounts against the draft return
- Import VAT claims against the supporting statements
Unreconciled differences should be investigated before submission.
3. Review VAT Coding
Check that each transaction has been assigned the correct VAT code. Common coding mistakes include:
- Treating exempt sales as zero-rated
- Claiming VAT where the supplier did not charge it
- Entering VAT-inclusive values as VAT-exclusive values
- Omitting credit notes
- Claiming private expenditure
- Recording an import as an ordinary UK purchase
- Ignoring domestic reverse-charge requirements
- Using the wrong tax point
4. Generate a Draft Return
Use the accounting or bridging software to create the draft return. Compare it with previous periods and investigate unexpected movements.
A sudden increase or fall may be legitimate, but it could also indicate a duplicated invoice, missing purchase, incorrect VAT rate or transaction posted to the wrong period.
5. Review the Nine Boxes
Check the values in each applicable box. Particular attention should be given to:
- Box 1 output VAT
- Box 4 recoverable input VAT
- Box 5 net liability or repayment
- Box 6 sales excluding VAT
- Box 7 purchases excluding VAT
A large difference between Box 6 sales and the business’s management accounts should be investigated, allowing for exempt, zero-rated and outside-scope transactions.
6. Make the Legal Declaration
The person submitting the return must confirm that the information is true and complete to the best of their knowledge.
Where an accountant submits the return, the business should still review and approve the figures. Appointing an agent does not remove the business’s underlying responsibility for maintaining accurate records.
7. Submit Through Compatible Software
Authorise the software to connect to HMRC, select the correct period and submit the return.
The business should retain:
- The submission confirmation
- The period covered
- The date and time submitted
- The unique receipt or reference
- A saved copy of the final nine-box return
Virtually all VAT-registered businesses must file through compatible software unless they are exempt.
When Is the VAT Return Deadline?
The deadline is normally one calendar month and seven days after the end of the VAT accounting period. The deadline for paying the VAT is usually the same as the filing deadline.
For example, a quarterly accounting period ending on 31 March would normally have a filing and payment deadline of 7 May.
The return and payment must arrive by the stated deadline, including where it falls on a weekend or bank holiday. Businesses should check the exact date through their VAT online account and allow enough time for the payment method to clear.
Do All Businesses File Quarterly?
Most businesses file every three months, but alternatives include:
- Monthly returns
- Annual Accounting Scheme returns
- Non-standard periods agreed with HMRC
- Final returns after deregistration
- Special arrangements for payments on account
The Annual Accounting Scheme allows eligible businesses to submit one return per year while making instalment payments during the year.
How Is a VAT Bill Paid?
A VAT return and the related payment are separate processes. Submitting the return does not necessarily pay the amount shown in Box 5.
Available payment methods can include:
- Direct Debit
- Faster Payments
- Online or telephone banking
- Debit or corporate credit card
- CHAPS
- Standing order in limited circumstances
- Payments through an overseas bank account
Payment references and processing times should be checked carefully. A new VAT Direct Debit generally needs to be arranged before the return is submitted, and HMRC states that it should be set up at least three working days beforehand for the payment to be collected.
What Happens When a VAT Refund Is Due?
When Box 4 is higher than Box 3, the return shows a repayment position. HMRC will normally repay the difference, subject to any checks it considers necessary.
VAT repayments are usually issued within 30 days of HMRC receiving the return, although verification checks can make the process longer. Businesses should ensure HMRC holds the correct bank details and retain evidence supporting larger or unusual claims.
A repayment should not be treated as guaranteed cash until HMRC has processed it. Refund claims may be reviewed where figures differ significantly from earlier periods or where the business is newly registered.
How Is Import VAT Reclaimed?
Import VAT treatment depends on how the goods were imported and how the VAT was accounted for.
A business may use:
- An import VAT certificate known as a C79
- A monthly postponed import VAT statement
- Other evidence permitted under the relevant import rules
Where import VAT has been paid through a duty deferment account, the business may need a C79 import VAT certificate to support the claim.
Where postponed VAT accounting has been used, the business generally declares and, subject to the normal rules, reclaims the import VAT through the same return. The amount should be checked against the postponed import VAT statement available through the Customs Declaration Service.
Do VAT Accounting Schemes Change the Calculation?
Yes. Businesses using a special scheme may need to calculate or complete parts of the return differently.
Cash Accounting Scheme
Under cash accounting, VAT is generally accounted for when customers pay and reclaimed when suppliers are paid, rather than purely from invoice dates.
Businesses may be eligible where estimated VAT-taxable turnover is no more than £1.35 million.
Annual Accounting Scheme
Eligible businesses with VAT-taxable turnover of £1.35 million or less may be able to submit one VAT return each year and make instalment payments towards the expected liability.
Flat Rate Scheme
Eligible businesses with VAT turnover of £150,000 or less, excluding VAT, may apply a fixed sector percentage to their VAT-inclusive turnover instead of calculating ordinary input and output VAT in the usual way.
Input VAT generally cannot be reclaimed separately under the Flat Rate Scheme, apart from specified purchases such as certain capital assets costing at least £2,000 including VAT.
The appropriate scheme should be reviewed as the business grows. A scheme that reduces administration does not necessarily produce the lowest VAT liability in every situation.
What Happens If a VAT Return Is Late?
VAT late-submission penalties use a points-based system.
A business normally receives one point each time a return is submitted late. When its threshold is reached, HMRC issues a £200 financial penalty. Further late returns while the business remains at the threshold can result in additional £200 penalties.
The usual thresholds are:
| Filing frequency | Penalty-point threshold |
| Annual | 2 points |
| Quarterly | 4 points |
| Monthly | 5 points |
The rules can apply to nil and repayment returns as well as returns showing tax due.
HMRC provides further information about late VAT return penalty points.
What Happens If VAT Is Paid Late?
Late payment interest normally runs from the first day the VAT is overdue until the outstanding amount is paid.
Separate late-payment penalties can apply when VAT remains unpaid:
- No first or second late-payment penalty is normally charged when payment is made within 15 days
- A first penalty may apply when payment is 16 to 30 days late
- Higher and continuing penalties may apply from day 31
HMRC’s current rules state that the first penalty for a payment between 16 and 30 days late is calculated as 3% of the amount outstanding at day 15. When payment is at least 31 days late, further charges can apply based on the amounts outstanding at days 15 and 30, followed by a daily second penalty calculated at an annualised rate.
Businesses unable to pay should contact HMRC as early as possible rather than ignoring the liability. A Time to Pay arrangement may help manage genuine short-term difficulty, but it must be agreed with HMRC.
How Can an Error in a VAT Return Be Corrected?
The correction method depends on the size and nature of the error.
An error from the preceding four years can generally be adjusted through the next VAT return when its net value is:
- £10,000 or less; or
- Between £10,000 and £50,000, but less than 1% of the total value of sales shown in Box 6 for the return in which the correction is made
Larger errors normally have to be disclosed separately to HMRC. Deliberate errors should also be reported rather than simply adjusted through a later return.
HMRC’s VAT error correction rules should be followed carefully because careless or deliberate inaccuracies can lead to penalties.
What Are the Most Common VAT Return Mistakes?
Frequent mistakes include:
- Missing the filing deadline because no VAT is payable
- Using the wrong accounting period
- Claiming VAT without a valid invoice
- Reclaiming VAT on private expenditure
- Omitting sales invoices or credit notes
- Applying the wrong VAT rate
- Confusing zero-rated and exempt supplies
- Entering VAT-inclusive values in Boxes 6 or 7
- Claiming import VAT without a C79 or postponed statement
- Ignoring partial exemption calculations
- Failing to account for reverse-charge transactions
- Manually copying data between systems without compliant digital links
- Assuming an accountant is responsible for every underlying transaction
A final reconciliation between the VAT return, bookkeeping records and bank transactions can identify many of these problems before submission.
Should a Business Use an Accountant?
A business is not required to appoint an accountant solely because it is VAT registered. Straightforward businesses with reliable accounting software and uncomplicated domestic transactions may be able to manage their own submissions.
Professional assistance may be worthwhile where the business:
- Imports or exports goods
- Supplies services internationally
- Makes both taxable and exempt supplies
- Uses a margin or Flat Rate Scheme
- Operates in construction and applies the domestic reverse charge
- Has several branches or accounting systems
- Is correcting significant historical errors
- Is facing an HMRC compliance check
- Has fallen behind with filings or payments
- Is considering voluntary registration or deregistration
Before appointing an adviser, the business may wish to compare typical accountancy costs and confirm exactly which VAT services are included.
VAT Return Submission Checklist
Before pressing submit, confirm that:
- The return covers the correct accounting period
- All sales invoices have been recorded
- All supplier invoices and credit notes have been recorded
- VAT rates and tax codes have been reviewed
- Input VAT claims are supported by appropriate evidence
- Bank and control accounts have been reconciled
- Import VAT statements have been checked
- Reverse-charge transactions have been included
- Boxes 1 to 9 have been reviewed
- The Box 5 amount is understood
- Any unusual movement has been investigated
- The return has been approved by an authorised person
- The payment method will clear by the deadline
- Submission evidence has been saved
Final Thoughts
Confident VAT filing depends less on what happens on submission day and more on the quality of the records maintained throughout the accounting period.
Using compatible software, reconciling transactions regularly, retaining valid invoices and reviewing unusual figures before submission can reduce the risk of errors, penalties and unexpected liabilities.
Tax rules, thresholds and VAT treatments can change. Businesses should check the latest HMRC requirements or obtain advice from a qualified tax professional where transactions are complex or the correct treatment is uncertain.
This information is general and does not replace advice based on a business’s individual tax circumstances.
Frequently Asked Questions
Can a VAT Return Be Submitted Without Paying Immediately?
Yes. Filing and payment are technically separate, but both are normally due by the same deadline. Submitting the return without paying can therefore prevent a late-filing issue while still leaving the business exposed to late-payment interest and penalties.
Does a Business Need to Submit a Return When It Made No Sales?
Yes. A VAT-registered business must normally submit a nil return even if it had no sales, VAT liability or VAT to reclaim.
Can a Spreadsheet Be Used for VAT Returns?
Yes, provided the spreadsheet forms part of a compliant digital record-keeping system and is connected to HMRC using compatible bridging software. Transfers between relevant parts of the system must follow the digital-link rules.
Can VAT Be Reclaimed Without a Receipt?
A proper VAT invoice is normally needed. Limited alternative evidence may sometimes be accepted, but a bank transaction or ordinary receipt does not automatically prove that VAT was correctly charged and recoverable.
Is the VAT Deadline Always the Seventh Day of a Month?
No. It is usually one calendar month and seven days after the accounting period ends. The exact date depends on the period assigned to the business and any special accounting arrangements.
How Long Should VAT Records Be Kept?
Most VAT records must be kept for at least six years. Longer periods can apply to certain specialised schemes.
Does an Accountant Remove the Business Owner’s Responsibility?
No. An accountant can calculate and submit the return, but the business must still provide complete records and remains responsible for ensuring its tax information is accurate.
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