Expert article
UK VAT Returns: Your Essential Short Guide
VAT doesn't have to be a headache. Once you understand when it applies, which scheme suits you and how returns work, it becomes a routine part of running your business.
Do I need to register?
You must register for VAT if your VAT-taxable turnover goes over £90,000 in any rolling 12-month period, or you expect it to go over that in the next 30 days alone. The test is on a rolling basis, not your accounting year, so it's worth checking every month as you grow.
You can also register voluntarily below the threshold. That can make sense if most of your customers are VAT-registered businesses, or if you have significant costs with VAT you'd like to reclaim.
The VAT rates
- Standard rate (20%): most goods and services.
- Reduced rate (5%): certain items such as domestic energy and children's car seats.
- Zero rate (0%): items such as most food and children's clothes.
Some supplies are exempt altogether, which is different from zero-rated and affects how much VAT you can reclaim.
Choosing the right scheme
- Standard accounting: you pay VAT based on invoices issued and received.
- Cash accounting: you pay VAT when your customers pay you, which helps cash flow if customers pay late.
- Flat Rate Scheme: you pay a fixed percentage of turnover. It's simpler, but it doesn't suit everyone, especially businesses with few costs.
- Annual accounting: one return a year with advance payments during the year.
Filing returns under Making Tax Digital
All VAT-registered businesses must keep digital records and file returns using software that connects to HMRC. Returns are usually quarterly, and the return and payment are normally due one calendar month and seven days after the end of the VAT period.
Common mistakes to avoid
- Registering late after crossing the threshold, which can mean paying VAT you never charged.
- Reclaiming VAT without a valid VAT invoice.
- Claiming VAT on business entertainment, which generally isn't allowed.
- Staying on a scheme that no longer suits the business.
JZ Consultants handles VAT registration, scheme reviews and quarterly MTD returns. See our VAT returns service or get in touch.
General guidance correct at the date of publication. Rates and thresholds can change, so check GOV.UK or ask us about your position.