A value-added tax (VAT) return is a regular report that VAT-registered businesses must submit to the United Kingdom’s tax authority. This report outlines how much VAT the business has charged customers on its sales and how much VAT it has paid on its purchases during a specific period, usually monthly or quarterly.

The purpose of a VAT return is to calculate whether the business needs to pay additional VAT to the tax authority or whether it is eligible for a refund. It’s a way the UK government tracks VAT collection and ensures over 2 million VAT-registered businesses are paying or reclaiming the correct amounts. Filing these returns is an important part of staying tax-compliant and avoiding penalties.

Below, we’ll explain who needs to submit a VAT return, the deadlines you should be aware of, how to submit a return online, and common mistakes.

What’s in this article?

• Who needs to submit a VAT return?
  
• What are the deadlines for VAT returns in the UK?
  
• How do you submit a VAT return online?
  
• What information do you need for a VAT return?
  
• What are common VAT return mistakes?
  

Who needs to submit a VAT return?

All VAT-registered businesses are required to submit VAT returns. This is true regardless of:

• Your business size

• How much VAT you’ve collected or paid in that period (even if you don’t owe any VAT)

• Your reason for VAT registration (e.g., exceeding the £90,000 threshold for taxable sales, voluntary registration)

If you’re not registered for VAT, you don’t need to submit a VAT return. Businesses that aren’t registered for VAT include those that:

• Earn less than the VAT threshold

• Haven’t registered voluntarily

• Deal only with VAT-exempt goods or services (such as certain financial services or education)

What are the deadlines for VAT returns in the UK?

In the UK, the deadlines for submitting VAT returns and making payments depend on your accounting period and your business’s VAT scheme. Here are the payment schedules:

• Quarterly returns: Most businesses submit VAT returns quarterly. The deadline for submitting the return and paying any VAT owed is one calendar month and seven days after the end of the accounting period. For example, the deadline for a VAT quarter ending March 31 would be May 7.

• Monthly returns: Some businesses choose to submit returns monthly, especially if they regularly reclaim VAT. The deadline remains the same: one calendar month and seven days after the end of the accounting period.

• Annual returns: If your business uses the Annual Accounting Scheme, you submit one VAT return per year. The deadline for this return is two months after the end of your 12-month accounting period. Throughout the year, you’ll make advance payments toward your VAT bill, monthly or quarterly, with a final payment due when you submit your VAT return.

All VAT payments must be made electronically, and your payment must reach the account of His Majesty's Revenue and Customs (HMRC) by the deadline. If the deadline falls on a weekend or bank holiday, the payment must clear HMRC’s account on the last working day before it. Not submitting your VAT return or paying the VAT due on time can result in penalties. As of January 1, 2023, a points-based penalty system is in place for late submissions, under which each late submission earns a penalty point, and reaching a certain threshold results in a £200 penalty.

The thresholds vary depending on your submission frequency. Fines for late payments depend on how late you pay, with the penalty amount increasing after 16 and 31 days.

How do you submit a VAT return online?

Once you know the steps, submitting your VAT return online in the UK is simple. Here’s how to do it:

• If your business is not registered for VAT, register it now. Once you’re registered, HMRC will give you a VAT number.

• Use your VAT registration number to set up an online VAT account. This is where you can find out when your returns are due and make payments. To set up an account:

  • Go to HMRC’s website for VAT services
    
  • Click “Start Now” and then “Create sign in details”
    
  • Follow the instructions to set up your account
    

• Next, get the right accounting software. Most businesses must submit VAT returns through Making Tax Digital (MTD)-compatible software such as QuickBooks, Xero, or Sage. HMRC has a list of approved options.

• Once your software is set up, connect it to your VAT account. Each platform has instructions for this.

• Fill in your VAT details. Some software will automatically pull in how much VAT you’ve paid or charged from your sales and purchase records, while others might require you to enter it manually.

• When you’re ready, click the Submit button in your software to submit your return. After the return has been submitted successfully, you should see a confirmation message.

• If you owe VAT, you’ll need to make the payment by the deadline. You can pay with:

  • Direct Debit
    
  • Bank transfer
    
  • Debit or credit card
    
  • Your online bank account
    
  • Standing order (only for businesses using the Annual Accounting Scheme or Payments on Account)
    
  • Your bank or building society
    

After filing, keep all your VAT records (in digital form) for at least six years as required by HMRC. This includes VAT invoices, receipts, and any records of your sales and purchases.

What information do you need for a VAT return?

For a VAT return, you’ll need to gather specific details about your business’s sales, purchases, and VAT activity during the accounting period. Here’s what you’ll need:

• The total value of all sales and income during the period, including VAT-taxable sales and zero-rated sales

• The total amount of VAT you’ve charged your customers on your sales during the period, also called “output tax”

• The total of all purchases your business made during the period, including goods bought for resale, operating costs such as office supplies, and more

• The total amount of VAT you’ve paid on goods and services purchased for your business, also known as “input tax”

• The difference between the VAT you’ve charged (output VAT) and the VAT you’ve paid (input VAT)

• Any adjustments for corrections to previous VAT returns, bad debt relief, or capital goods scheme adjustments for large purchases such as machinery or property

If your output VAT is greater than input VAT, you owe VAT to HMRC. If your input VAT is greater than output VAT, you can reclaim the difference.

What are common VAT return mistakes?

When filing VAT returns, businesses can make certain common mistakes that can result in penalties or difficulties proving compliance. Here are some mistakes to look out for and tactics to help you avoid them:

• Missing the deadline: You could face penalties if you miss the date for submitting your VAT return or paying what you owe. To avoid this, set reminders for your VAT deadlines well ahead of time, or consider setting up a Direct Debit so payments happen automatically.

• Making calculation errors: Doing your own VAT calculations can get complicated, especially if you’re dealing with different VAT rates or many transactions. Even a small error can lead to overpaying or underpaying. To avoid this, use VAT-friendly accounting software to handle your calculations and reduce the chances of mistakes.

• Claiming VAT on personal expenses: HMRC requires VAT claims to be strictly business-related. Claiming for something personal (even if done accidentally) can create problems for your business. To avoid this, keep your business and personal finances separate and include only claims for purchases explicitly related to your business.

• Claiming VAT on ineligible business expenses: Not everything business-related is VAT claimable. For example, you usually can’t claim for client entertainment, and some items used partly for personal purposes might not fully qualify. Double-check which expenses are allowed under VAT rules to avoid claiming the wrong expenses. For mixed-use items (i.e., if you have one laptop for work and personal use), claim only the amount proportional to how much you use it for business.

• Forgetting to include all sales: Leaving out sales, even if they’re zero-rated, can create problems with your return. Record every sale, even if you didn’t charge VAT. If you’re using software, make sure it can handle different VAT categories, such as zero-rated.

• Getting international sales wrong: Working with overseas customers or suppliers can get complicated. You might need to apply a reverse charge (where the customer handles VAT) or report EU sales differently now that the rules have changed post-Brexit. Carefully study the VAT rules for imports and exports to learn when reverse charges apply, and consider using tax software with features that account for this.

• Forgetting about bad debt relief: If a customer hasn’t paid you after six months, you can reclaim the VAT you paid to HMRC for that sale. Many businesses forget to do this and miss out on savings. To avoid making this mistake, monitor overdue invoices, and double-check at the six-month mark whether they qualify for a VAT adjustment.

• Using the wrong VAT scheme: Different VAT schemes have different rules. If you’re on the Flat Rate Scheme or Annual Accounting Scheme, filing your return the “normal” way could cause issues. Make sure you’re following the rules for your specific scheme.

• Inputting everything by hand: Manual data entry can lead to typos or missed digits that could cause errors with your VAT return. To avoid this, use accounting software that automatically pulls data from your invoices and receipts. In addition to reducing mistakes, this saves you time.

• Not keeping proper records: HMRC expects you to keep VAT records with invoices and receipts for at least six years. If your records are missing or disorganized, it can cause compliance issues, especially during an audit. To simplify this requirement, store all your VAT records digitally. Most accounting software keeps everything in one place, so you can easily find what you need if HMRC requests it.

• Overlooking adjustments: Sometimes, you need to adjust your VAT return, whether you’re fixing an error from a previous return or claiming VAT on a big purchase such as equipment or machinery. Forgetting these adjustments can cost you money. Before filing, review whether there’s anything you need to adjust so you don’t miss out on these claims.