Two people looking at documents on table | How to file a VAT Return

How to file a VAT Return: A step-by-step guide

April 24, 2023
VAT, or Value Added Tax, is a consumer tax charged by the HM Revenue and Customs (HMRC) on many goods and services. If you’re running a VAT-registered business, you’ll need to submit a regular VAT Return to HMRC on a regular basis.When you’re a self-employed small business owner, the various rules and regulations around how to file a VAT return can put your head in a spin, especially if you’re filing a VAT Return for the first time.If you’re not sure which steps to take to file your VAT Return, we’ve got you covered. In this article, we’ll outline the information you need to file a VAT Return, how often they need to be filed and how to file your VAT Return online.

What is a VAT Return?

A VAT Return is a tax form showing how much VAT you are required to pay HMRC based on the goods and services are selling, with each item charged at a different rate of VAT.In the UK, there are 3 different rates of VAT: standard rate, reduced rate an zero-rate.
Rate%Applicable to
Standard20%Most goods and services
Reduced5%Children's car seats, fuel and power for domestic use, energy-saving materials installed for domestic use
Zero0%Books and newspapers, children's clothes and shoes, motorcycle helmets
Source: GOV.UK

For items that are VAT exempt or fall outside the scope of VAT, head over to our article on UK VAT rates.

As soon as you register your business for VAT, you’ll need to start charging VAT on taxable sales – this is known as output VAT.

In addition, you may also be able to claim back any VAT charged on purchases your business has made, plus other business expenses. This is known as input VAT.
Diagram showing how VAT works | Output VAT - Input VAT = Amount of VAT owed to HMRC
At the end of your accounting period, you need to calculate the difference between your output and input VAT and pay this amount to HMRC.

How often do I need to file my VAT Return?

Most businesses need to submit quarterly VAT returns every 3 months at the end of what’s known as an accounting period. You’ll need to list the dates defining your accounting period on your VAT Return — for instance, 1st January to 31st March.The exact dates defining each 3-month period will depend on when you registered your business for VAT, as well as whether you requested a particular stagger.
You can find out the specific dates when you need to file your VAT Returns from HMRC by looking them up on your VAT online account.

In some circumstances, for instance if you’re a regular repayment trader, you can request to file VAT Returns on a monthly basis.

When do I need to file my VAT Return?

You need to submit your VAT Return 1 month and 7 days after the end of the 3-month VAT period. This means that over the period of a year, you will need to file 4 VAT Returns.

What should be included on a VAT return?

As a VAT Return shows how much VAT you need to pay to HMRC, your VAT Return will contain a summary of your income and expenses, as well as the amount of VAT you need to pay or reclaim during the 3-month period.Your VAT Return should include the following information:
    Total sales and purchasesAmount of VAT dueAmount of VAT you can reclaim for purchases made by your business

Making Tax Digital for VAT

From 1st April 2022, Making Tax Digital for VAT (MTD VAT) became mandatory for all VAT-registered business owners, irrespective of whether their annual taxable turnover exceeds the VAT registration threshold.

With this in mind, if your company is registered for VAT, you’ll need to use MTD-approved software to file your next VAT Return online.
You can only submit your return on paper by post or another method if you’re exempt from Making Tax Digital for VAT. You could be eligible for exemption if:

    You object to using computers on religious groundsYou cannot use a computer due to your age, disability or lack of internet access where you live
You can also appoint an agent or accountant to file your VAT Return on your behalf or use your VAT online account if you use the VAT Annual Accounting Scheme.

What do you need to register for Making Tax Digital for VAT?

To register for MTD VAT, you’ll first need to get set up compatible software. This can be either MTD-approved accounting software — such as Ember — or HMRC-approved bridging software.

Next, you’ll need to have the following information to hand:
    Your business email address A Government Gateway user ID and password – if you don’t have a user ID, you can create one when you start to use the service Your VAT registration number and latest VAT Return
Once you have your Government Gateway user ID and your VAT number, you can start to file your VAT Return online.

How difficult is it to complete an online VAT Return?

While it is possible to file your VAT Return without any accounting support, the rules around filing VAT are complex, leaving a lot of room for error.If you opt to file your VAT Return by yourself, you’ll need to keep track of:
    Any changes in VAT rates Whether or not you can claim input VAT What to do if you make a make a mistake on your VAT Return Specialist VAT schemes, such as the Flat Rate scheme, cash accounting scheme or any retail schemes
More details on the rules around filing your VAT Return can be found in the VAT guide on GOV.UK.

Paying your VAT bill and penalties

When it comes to making your VAT payment to HMRC, you’ll need to make sure you pay VAT within 1 month and 7 days of the end of your accounting period.
To make your payment, you can pay online using credit card or debit card, set up a direct debit or even pay VAT online by Bacs. We’ve summarised the different ways you can pay VAT online in the video below.

Paying VAT online in the UK: Video Guide

this must be done electronically, for example by setting up a direct debit or online transfer through internet banking. A direct debit will enable HMRC to withdraw the VAT you owe directly from your bank account on the due date.If you miss the VAT payment due date, you’ll be issued a penalty point, with the amount you could be fined aligned with the number of points you have.The amount you receive in penalties will increase until you reach the penalty point threshold, where you’ll be hit with a £200 penalty. After reaching this threshold, you’ll then receive a further £200 penalty for each subsequent late VAT Return submission.
More information on the penalty point system, as well as how to remove penalty points can be found at GOV.UK