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All you need to know about filing your next VAT Return.

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

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.

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.

<div><table>
<tr><th>Rate</th><th>%</th><th>Applicable to</th></tr>
<tr><td>Standard</td><td>20%</td><td>Most goods and services</td></tr>
<tr><td>Reduced</td><td>5%</td><td>Children's car seats, fuel and power for domestic use, energy-saving materials installed for domestic use</td></tr>
<tr><td>Zero</td><td>0%</td><td>Books and newspapers, children's clothes and shoes, motorcycle helmets</td></tr>
</table></div>
<div><p><em>Source: <a href="https://www.gov.uk/vat-rates" class="text-red-400">GOV.UK</a></em></p></div>

<div><p>For items that are VAT exempt or fall outside the scope of VAT, head over to <b><a href="https://ember.co/content/article/uk-vat-rates" class="text-red-400">our article on UK VAT rates</a></b>.</div></p>

<div><p>As soon as you <b><a href="https://ember.co/feature/tax-registration" class="text-red-400">register your business for VAT</a></b>, you’ll need to start charging VAT on taxable sales – this is known as <b>output VAT</b>.</div></p>

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.

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. 

<div><p>You can find out the specific dates when you need to file your VAT Returns from HMRC by looking them up on your <b><a href="https://www.gov.uk/sign-in-vat-account" class="text-red-400">VAT online account</a></b>.</div></p>

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

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.

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:

Amount of VAT you can reclaim for purchases made by your business

<div><p>From 1st April 2022, <b><a href="https://ember.co/content/article/making-tax-digital-timeline" class="text-red-400">Making Tax Digital for VAT (MTD VAT)</a></b> became mandatory for all VAT-registered business owners, irrespective of whether their annual taxable turnover exceeds the <b><a href="https://ember.co/content/article/vat-registration-threshold" class="text-red-400">VAT registration threshold</a></b>.</div></p>

With this in mind, if your company is registered for VAT, you’ll need to use MTD Recognised software to file your next VAT Return online.

<div><p>You can only submit your return on paper by post or another method if you’re <b><a href="https://ember.co/content/article/vat-exemption" class="text-red-400">exempt from Making Tax Digital for VAT</a></b>. You could be eligible for exemption if:</div></p>

You object to using computers on religious grounds

You 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?

<div><p>To register for MTD VAT, you’ll first need to get set up compatible software. This can be either MTD Recognised accounting software — such as <b><a href="https://ember.co/" class="text-red-400">Ember</a></b> — or HMRC Recongnised bridging software.</div></p>

Next, you’ll need to have the following information to hand:

<div><ul>
<li>Your business email address</li>
<li>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</li>
<li>Your <b><a href="https://ember.co/content/article/what-is-a-vat-number" class="text-red-400">VAT registration number</a></b> and latest VAT Return</li>
</div></ul>

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:

<div><ul>
<li>Any changes in VAT rates</li>
<li>Whether or not you can claim input VAT</li>
<li>What to do if you make a <b><a href="https://ember.co/content/article/how-to-correct-vat-errors-and-make-adjustments" class="text-red-400">make a mistake on your VAT Return</a></b></li>
<li>Specialist VAT schemes, such as the Flat Rate scheme, cash accounting scheme or any retail schemes</li>

<div><p>More details on the rules around filing your VAT Return can be found in the <b><a href="https://www.gov.uk/guidance/vat-guide-notice-700" class="text-red-400">VAT guide on GOV.UK</a></b>.</div></p>

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.

<div><p>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 <b><a href="https://ember.co/content/article/how-to-pay-your-uk-vat-bill" class="text-red-400">pay VAT online in the video below.</div></p>

<div><h3>Paying VAT online in the UK: Video Guide</h3></div>
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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.

<div><p>More information on the penalty point system, as well as how to remove penalty points can be found at <b><a href="https://www.gov.uk/guidance/penalty-points-and-penalties-if-you-submit-your-vat-return-late" class="text-red-400">GOV.UK</a></b></p></div>.

Sole traders can be VAT registered, but there are a few things to consider first. Find out if registering for VAT is the right choice for your business.

Can a sole trader be VAT registered?

Simple language, simple software, so that you can spend less time dealing with admin and more time focusing on what really matters.

Join us in creating the new age of accounting.

<div><p>If you’re looking to step into self-employment swiftly, you’ll likely <b><a href="https://ember.co/content/article/getting-started-as-a-sole-trader" class="text-red-400">start out as a sole trader</a></b>. Not only is this one of the easiest ways to get your new small business off the ground, but as your own boss you’ll be calling all the shots when it comes to how you run your business.</div></p>

<div><p>As the main decision maker, you might wonder if you need to register your business for <b><a href="https://ember.co/content/article/what-is-vat" class="text-red-400">Value Added Tax (VAT)</a></b> as your business gets more established.</div></p>

If you’re earning above the VAT threshold you’ll need to register for VAT, irrespective of your business structure. However, if your annual turnover isn't there yet but you think your business may benefit from voluntary registration, read on.

We’ll be covering when sole traders need to register for VAT, how to register and the benefits that come with owning a VAT registered business.

If your annual turnover in the last 12-month period exceeds £85,000, or you expect to surpass this amount in the next 30 days, you’ll need to register your sole trader business for VAT.

<div><p>As the <b><a href="https://ember.co/content/article/vat-registration-threshold" class="text-red-400">VAT registration threshold</a></b> for the 2022/23 tax year is set at this amount, any sole trader business earning above the threshold is legally required to register their business for VAT. With this in mind, if you're a sole trader with a taxable turnover above £85,000, <b>you'll need to start paying VAT on your income</b>.</div></p>

<div><p>Until the end of the 2023/24 tax year, the government has frozen the VAT threshold at £85,000, but this can change. You can find VAT thresholds for previous years at <b><a href="https://www.gov.uk/government/publications/vat-notice-7001-should-i-be-registered-for-vat/vat-notice-7001-supplement--2" class="text-red-400">GOV.UK</a></b>.</div></p>

The majority of purchases you’ve made would have charged you VAT and, until now, you’ve probably never given it a second thought. However, as a VAT registered business owner, your relationship with VAT will be slightly different.

<div><p>VAT, or <b><a href="https://ember.co/content/article/what-is-vat" class="text-red-400">Value Added Tax</a></b>, is a consumer tax paid on goods and services at every stage of the production line.</div></p>

This tax is charged on any good or service that can be classified as ‘taxable supplies’ and can include any of the following:

‘Non-sales’, such as bartering, part-exchange and gifts

If you purchase an item from a VAT registered manufacturer or supplier, you’ll pay VAT on top of the baseline cost, and if VAT registered yourself, will charge your customers VAT on the items you sell.

In this chain, the tax you pay your supplier is referred to as input tax, whereas the tax you charge customers is output tax. Taking both of these into consideration, you can work out exactly how much VAT you owe HMRC.

The idea here is that you eventually break even, but if you’ve paid more VAT to suppliers than you’ve claimed back from customers, you’ll be able to reclaim the different from HMRC.

If the opposite is true — that you’ve claimed more VAT from customers than you’ve paid to HMRC — then you’ll need to pay the difference.

<div><p>Unless you’re on a specific payment scheme, such as the Flat Rate Scheme, you’ll need to file a VAT Return to HMRC every 3 months that totals both your output VAT and input VAT. For more on exactly how to pay, check out our <b><a href="https://ember.co/content/article/how-to-pay-your-uk-vat-bill" class="text-red-400">ultimate guide to paying your VAT bill</a></b>.</div></p>

<div><p>The amount of VAT you’ll need to apply to the items you sell depends on the <b><a href="https://ember.co/content/article/uk-vat-rates" class="text-red-400">VAT rate</a></b> attributed to them. There are 3 different rates of VAT in the UK: <b>standard rate</b>, <b>reduced rate</b> and <b>zero-rate</b>.</div></p>

<div>
<table>
<tr>
<th>Rate</th>
<th>%</th>
<th>Applicable to</th>
</tr>
<tr>
<td>Standard</td>
<td>20%</td>
<td>Most goods and services</td>
</tr>
<tr>
<td>Reduced</td>
<td>5%</td>
<td>Children's car seats, maternity and sanitary products, fuel and power for domestic use, energy-saving materials installed for domestic use</td>
</tr>
<tr>
<td>Zero</td>
<td>0%</td>
<td>Books and newspapers, children's clothes and shoes, motorcycle helmets</td>
</tr>
</table>
</div>

These rates are accurate at the time of writing, but keep in mind that the rates can change at any time and you’ll need to start charging the updated VAT rates you charge from the day they change.

<div><p>If you sell items that are either <b><a href="https://ember.co/content/article/vat-exemption" class="text-red-400">VAT exempt</a></b> or out of scope, you’ll still need to record these items in your general business accounts, but won’t need to include them in your taxable turnover for VAT purposes. <b>If you only sell VAT exempt or out of scope items, you won’t need to register for VAT</b>.</div></p>

<div><p>For a full breakdown on where you can and can’t charge VAT, and how much to charge, head over to our <b><a href="https://ember.co/content/article/uk-vat-rates" class="text-red-400">guide to VAT rates</a></b>.</div></p>

<div><p>You can work out how much VAT you’ll need to charge your customers with our <b><a href="https://ember.co/calculator/vat" class="text-red-400">VAT calculator</a></b>, or with <b><a href="https://ember.co/" class="text-red-400">Ember</a></b>, we’ll automatically apply these changes for you, giving you one less thing to worry about.</div></p>

If you opt to voluntarily register your business for VAT, you’ll be able to reap the following benefits:

<div><ul>
<li><b>You may appear more established</b> as the current VAT threshold for compulsory registration is a taxable turnover of £85,000. Since potential clients won’t know whether you registered voluntarily or not, they’ll likely assume you’re earning above the threshold and, under the guise of being more established, will be more inclined to work with you.</li>
<li><b>VAT registered clients can reclaim the VAT you charge</b> from HMRC, so your prices stay competitive.</li>
<li><b>Keeping more up-to-date and accurate <b><a href="https://ember.co/content/article/what-records-do-i-need-to-keep-as-a-sole-trader" class="text-red-400">records</a></b> is an essential part of VAT registration, which can provide more details business insights.</li>
<li><b>You can reclaim VAT on certain items purchased prior to the date you registered</b>. For specifics on how far back you can claim, <b><a href="https://ember.co/book-accountant-call" class="text-red-400">book a call</a></b> with one of our accountants.</li>
</ul></div>

How to become a VAT registered sole trader

<div><p>If you need to register your sole trader business for VAT, you can register for VAT online by creating <b><a href="https://www.tax.service.gov.uk/register-for-vat" class="text-red-400">Government Gateway account</a></b>. You’ll need this online account to submit your VAT Returns, or can use a third party — such as Ember — to file your VAT Returns directly to HMRC for you.</div></p>

There are a few where you’ll need to register by post using a VAT1 form, for instance if:

You want to apply for a ‘registration exception’

You’re joining the Agricultural Flat Rate Scheme

You’re registering the divisions or business units or a body corporate under separate VAT numbers

To become a VAT registered sole trader, you'll need the following information close to hand:

<div><ul>
<li><b><a href="https://ember.co/content/article/what-is-a-national-insurance-number" class="text-red-400">National Insurance  (NI) number</a></b> or your <b><a href="https://ember.co/content/article/what-is-a-unique-taxpayer-reference-number" class="text-red-400">Unique Taxpayer Reference (UTR)</a></b></li>
<li>Details of other businesses you've owned in the past 2 years</li>
<li>Your business bank account details</li>
</div></ul>

Once you’ve registered your business for VAT, HMRC will send a VAT registration certificate confirming your registration, which will contain the following information:

<div><ul>
<li>A <b><a href="https://ember.co/content/article/what-is-a-vat-number" class="text-red-400">9-digit VAT registration number</a></b> which you’ll need to include on all invoices you raise</li>
<li>Information about when to submit your first VAT return and payment</li>
<li>Confirmation of your registration date, or your ‘effective date of registration’</li>
</ul></div>

This information will either be sent to your online VAT or to your address by post, depending on how you registered.

<div><p>As of 1st April 2022, now <b>all VAT registered business owners must register for <a href="https://ember.co/content/article/making-tax-digital" class="text-red-400">Making Tax Digital for VAT</a></b>.</div></p>

Beforehand, only business owners who were earning above the VAT threshold needed to register, but with the latest legislation update you’ll now need to sign up for MTD for VAT, regardless of your taxable turnover. 

Under MTD for VAT, you’ll need to store all your VAT records digitally and file your tax returns using HMRC Recognised MTD-compatible bridging or accounting software.

<div><p>If you’re not sure where to start, you can check out our guide to <b><a href="https://ember.co/content/article/mtd-for-vat-online-software" class="text-red-400">finding the right VAT Return online software for your business</a></b> — but to save you from scrolling, we can confirm that Ember is MTD for VAT Recognised.</div></p>

Looking for the right VAT Return online software? Here's our guide to finding the right one for you.

Finding the right VAT Return online software for your business

<div><p>HMRC’s Making Tax Digital — or MTD — is officially underway, with the Making Tax Digital for <b><a href="https://ember.co/content/article/what-is-vat" class="text-red-400">VAT</a></b> scheme officially mandatory for all VAT registered self-employed business owners earlier this year.</div></p>

If you’ve just surpassed the VAT threshold, or have recently registered on a voluntary basis, you’ll need to not only make sure that you’re registered for the scheme, but that you have the right software in place to keep compliant.

Not sure which online software is the best fit for your business? We’ll explore the different MTD-compatible software options out there and the factors you’ll need to consider to find the best solution for you.

Before we dive in, we’ll quickly refresh your memory on what exactly Making Tax Digital is.

<div><p><b><a href="https://ember.co/content/article/making-tax-digital" class="text-red-400">Making Tax Digital</a> is a government initiative designed to make it easier for business owners to keep their tax records accurate and up-to-date using digital software.</b></p></div>

<div><p>Launched in 2019, the first phase was aimed at digitalising the way VAT registered business owners earning above the <b><a href="https://ember.co/content/article/vat-registration-threshold" class="text-red-400">£85,000 VAT registration threshold</a></b> both filed their VAT Returns and stored their VAT records. The latest phase, launched in April 2022, targeted all VAT registered business owners, including those that had voluntarily registered for VAT, irrespective of whether or not they were earning over the threshold.</div></p>

Under this scheme, now all VAT registered business owners must store their VAT records digitally, and must file VAT Returns to HM Revenue and Customs (HMRC) using compatible software.

HMRC aren’t stopping at VAT, with MTD for Income Tax Self Assessment (MTD for ITSA) and Corporation Tax due to roll out in 2024 and 2026 respectively.

In this piece we’ll be walking you through MTD-compatible software for VAT, but be sure to watch this space for future MTD updates.

Under MTD for VAT, there are two types of compatible software recognised by HMRC: bridging software and accounting software.

For the sole traders and small business owners who prefer using spreadsheets to keep tabs on their taxes, bridging software might be for you.

Bridging software is a way of connecting digital records stored in non-compatible software, such as Excel or Google Sheets, to HMRC systems using digital links.

By acting as a channel between the data on the spreadsheets and HMRC, bridging software is best suited to those who need to comply with MTD for VAT, but are hesitant to commit to using full MTD for VAT software.

Accounting software, on the other hand, offers business owners the platform to upload, store and send their data directly to HMRC.

This option is for those who are looking for a more hands-off approach, where rather than manually calculating what they owe, the accounting software does it for them.

<div><p>When shopping around for MTD for VAT-compliant accounting software, be sure to look into what each package has to offer. Some packages only offer the basics, while others — such as <b><a href="https://ember.co/" class="text-red-400">Ember</a></b> — offer guidance throughout the entire process, from getting you registered for MTD for VAT, to filing your VAT Returns directly to HMRC for you.</div></p>

Why choosing the right MTD software is important

Since you’ve got more pressing matters to attend to — like actually running your business — you might be tempted to settle for the first package that you come across. However, it can pay — literally — to take the time to find the accounting software that’s best suited to your business needs.

Aside from compliance, choosing the right MTD software can benefit your business by:

<div><ul>
<li><b>Minimising the risk of errors</b> by increasing the accuracy of the records you keep and, as a result, increases the likelihood you pay the correct amount of tax.</li>
<li><b>Reducing the risk of filing late</b> and incurring late payment penalties.</li>
<li><b>Reducing the total amount of paperwork</b> you have to do, freeing up more time for you to focus on your business.</li>
<li><b>Simplifying complex processes</b>, such as partial exemption and differentiating between <b><a href="https://ember.co/content/article/uk-vat-rates" class="text-red-400">zero-rate</a></b> and <b><a href="https://ember.co/content/article/vat-exemption" class="text-red-400">VAT exempt</a></b> items on your tax Return.</li>
<li><b>Providing additional business insights</b>. For example, consistent VAT data entries can provide insight into profit margins and can be used to assess current business strategies.</li>
</ul></div>

Things to consider before settling on a software

Before starting your search for the perfect MTD-compatible software, make sure you’ve taken the following factors into consideration to avoid any issues further down the line.

HMRC uses APIs, otherwise known as Application Programming Interfaces, to securely enable data exchanges between their systems and your software.

As a result, even if you are storing your records digitally (for example, in an Excel spreadsheet), you’ll need to make sure the software you’re using is MTD-compliant, otherwise it won't be able to connect to HMRC.

<div><p>You can find the full list of <b><a href="https://www.tax.service.gov.uk/making-tax-digital-software" class="text-red-400">MTD for VAT Recognised software at GOV.UK</a></b> — but to save you from scrolling, we can confirm that <b>Ember is MTD for VAT Recognised</b>.</div></p>

Choose the best solution for your business

<div><p>Depending on the details of your business, you might find it beneficial to opt for an MTD software that can also offer support in other areas of your business. For instance, if you have employees you might want a software package that can integrate with a third-party payroll software, or opt for accounting software that can <b><a href="http://ember.co/" class="text-red-400">automate your tax and accounting</a></b> business admin for you.</div></p>

Find the right software in your price range

Regardless of whether you registered your business for VAT voluntarily or not, understandably you wouldn’t want to pay more for an MTD for VAT-compliant provider than you have to.

While there are plenty of free online software options out there, you might find they don’t offer the support you need to successfully file your VAT Returns. Other accounting software providers may charge a flat rate irrespective of your business size, meaning that you’re paying for more than you actually need.

<div><p>Here’s where Ember’s pay-as-you-grow pricing model comes in. We’ve tailored our payment plans to meet your business needs, meaning you’ll never pay more than you have to. To find out more, head over to the <b><a href="https://ember.co/pricing" class="text-red-400">Ember Pricing page</a></b>, or book a demo with a member of our team via the button below.</div></p>

Everything you need to know about National Insurance, from what it is and why we pay it, to who needs to pay it and how much needs to be paid.

The Complete Guide to National Insurance

<div><b>This article was updated 28th April 2023.</b></div>
<div><p>Whether you're an employee, business owner or <b><a href="https://ember.co/content/article/do-i-need-to-pay-national-insurance-as-a-sole-trader" class="text-red-400">self-employed sole trader</a></b>, you'll legally need to pay National Insurance contributions if you're earning above a certain amount. But what even is National Insurance, and where does the money go?</div></p>

In this article, we’ll be covering everything you need to know about National Insurance, from what it is and why we pay it, to who needs to pay it and how much needs to be paid.

National Insurance (NI) is a tax on earnings and self-employed profits, and is paid by employees, employers and self-employed sole traders to qualify for certain benefits and the State Pension.

<div><p>National Insurance is usually taken as a deduction at source under Pay As You Earn (PAYE) if you're an employee or limited company director. However, if you're a self-employed sole trader, you'll pay your National Insurance contributions alongside the <b><a href="https://ember.co/content/article/payments-on-account-paying-your-taxes-as-a-sole-trader-or-limited-company" class="text-red-400">payments on account</a></b> you make towards your Income Tax bill.</div></p>

At the time of writing, National Insurance is mandatory if you're 16 or over and are either a:

 Self-employed individual and making a profit of more than £12,570 a year

<div><p>If you're an employee earning between <b>£123-£242 a week</b>, or a self-employed individual with profits between <b>£6,725 and £12,570 a year</b>, you won't need to pay National Insurance, but you can still qualify for benefits and the State Pension. Here, your contributions are treated as paid to protect your National Insurance record, but you can make <b><a href="https://ember.co/content/article/voluntary-national-insurance-contributions" class="text-red-400">voluntary National Insurance contributions</a></b> to plug the gaps if you wish.</div></p>

If you are still earning by the time you reach State Pension age, you will no longer need to make National Insurance contributions — meaning that, as a result, you’ll see an increase in your take-home pay. However, when exactly you stop paying National Insurance depends on the type of employment you’re in, which we’ll cover in further detail below.

Aside from being a legal requirement if you are eligible to pay National Insurance, a gap in your National Insurance contributions record could affect the state benefits that you are entitled to, such as the State Pension.

You might be able to apply for National Insurance credits if you cannot work, for example if you cannot work due to illness or if you are a carer for someone.

<div><p>For most workers, National Insurance is deducted at source by their employer through <b><a href="https://ember.co/content/article/what-does-paye-mean" class="text-red-400">Pay As You Earn (PAYE)</a></b>, with the total amount deducted displayed on the employee’s payslip.</div></p>
<div><p>For self-employed sole traders and limited company directors, however, your National Insurance is paid when you pay your <b><a href="https://ember.co/content/article/self-assessment-tax-return-a-definitive-guide-for-sole-traders" class="text-red-400">Self Assessment tax bill</a></b> on 31st January every year.</div></p>

<div><p>To pay your National Insurance, you’ll need to make sure you have a <b><a href="https://ember.co/content/article/what-is-a-national-insurance-number" class="text-red-400">National Insurance number</a></b>, a unique code assigned to you made up of a combination of letters and numbers that matches you to your tax records. You can find your NI number on one of the following documents:</div></p>

<div><ul>
<li>Your payslip</li>
<li>Your <b><a href="https://ember.co/content/article/what-is-a-p60" class="text-red-400">P60</a></b></li>
<li>On letters about your tax, pension and benefits</li>
<li>In the National Insurance section of your personal Government Gateway account</li>
</div></ul>

<div><p>You should automatically be given a National Insurance number if you are a UK citizen just before you turn 16, but you can apply for a National Insurance number if you don’t have one at <b><a href="https://www.gov.uk/apply-national-insurance-number" class="text-red-400">GOV.UK</a></b>.</div></p>

You cannot, however, request a new National Insurance number if you lose yours, so be sure to keep your National Insurance number safe to protect yourself from identity fraud.

How much National Insurance do I need to pay?

The total amount of National Insurance you need to pay comes down to three key factors: the National Insurance class you fall into, the amount you earn and the National Insurance rate for the tax year in question.

The first factor, the National Insurance class that you fall into, is determined by your employment status. As mentioned above, if you’re not earning you won’t be paying National Insurance, but can pay voluntary National Insurance contributions to avoid gaps in your National Insurance record.

The National Insurance classes and the employment status of those who fall into each category are outlined below:

<div><table>
<tr><th>National Insurance class</th><th>Who pays</th></tr>
<tr><td>Class 1</td><td>Employees earning more than £242 a week and under State Pension age</td></tr>
<tr><td>Class 1A or 1B</td><td>Employers pay these directly on their employee's expenses or benefits</td></tr>
<tr><td>Class 2</td><td>Self-employed people earning profits of £12,570 or more a year</td></tr>
<tr><td>Class 3</td>Voluntary contributions (can be paid to fill or avoid gaps in your National Insurance record</td></tr>
<tr><td>Class 4</td><td>Self-employed people earning profits of £12,570 or more a year</td></tr>
</div></table>
<div><p><em>Source: <a href="https://www.gov.uk/national-insurance/national-insurance-classes" class="text-red-400">GOV.UK</div></p>

National Insurance contributions for the 2023/34 tax year

<div><table>
<tr><th>Your pay</th><th>Class 1 National Insurance rate</th></tr>
<tr><td>£242 to £967 a week (£1,048 to £4,189 a month)</td><td>12%</td></tr>
<tr><td>Over £967 a week (£4,189 a month)</td><td>2%</td></tr>
</div></table>

<div><table>
<tr><th>Class</th><th>Rate</th></tr>
<tr><td>Class 2</td><td>£3.45 a week</td></tr>
<tr><td>Class 3</td><td>£17.45 a week</td></tr>

<div><p><b>Note:</b> If you're paying Class 2 contributions for the previous tax year or Class 3 contributions for the previous 2 tax years, you'll need to pay the original rate for those tax years. You can find these rates at <b><a href="https://www.gov.uk/voluntary-national-insurance-contributions/rates" class="text-red-400">GOV.UK</a></b>.</div></p>

<div><table>
<tr><th>Threshold</th><th>£ per year</th><th>Rate</th></tr>
<tr>
<td>Lower Profits Limit</td>
<td>£12,570</td>
<td>9%</td>
</tr>
<tr>
<td>Upper Profits Limit</td>
<td>£50,270</td>
<td>2%</td>
</tr>
</table></div>

<div><p>While the National Insurance hikes might be enough to set any self-employed sole trader on edge, <b><a href="https://ember.co/" class="text-red-400">Ember</a></b> has your back. By combining easy automation with the expertise of our qualified accountants, we’ll make sure you get the all tax breaks you’re entitled to, helping you get more of your money back.</div></p>

Find out what VAT receipts are, why they're crucial to your VAT records and how to safely store them.

What is a VAT receipt?

Chances are the last transaction you made features a VAT charge. You only need to take a closer look at your receipt to spot it.

VAT is part of our daily lives, both as consumers and business owners. As a business owner, you’ve probably been advised to keep hold of your VAT receipts. And rightfully so — keeping digital VAT records is a legal requirement for VAT-registered business owners.

This isn’t to bury you in piles of unnecessary paperwork. For companies looking to claim back the VAT on goods and services they’ve bought for the business, they must supply valid VAT receipts. That’s why it’s important to understand what a valid VAT receipt looks like, as well as the best practices for record keeping.

With this in mind, read on for an overview of VAT receipts. One that’s relatively simple to get your head around.

VAT receipts show what you’ve bought from a supplier and how much VAT you’ve paid.

Under UK law, any VAT-registered business must provide their customers with a VAT receipt. That means you’re legally allowed to request one, as are your customers.

It’s also important to store your VAT receipts safely, as you’ll need them when submitting your VAT return. These will evidence the total amount of VAT you’ve paid, and make sure that your tax bill or tax rebate is as accurate as possible.

For some transactions, such as telephone calls and commercial tolls of £25 or less, you’ll be able to claim back VAT without a receipt.

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To better understand why you might request a VAT receipt, we'll dive into what VAT is and how it works.

<div><p><b><a href="https://ember.co/content/article/what-is-vat" class="text-red-400">VAT</a></b>, otherwise known as ‘Value Added Tax’, is a consumer tax applied to anything classified as a <b>taxable supply</b>, such as the sales of goods, services and assets.</div></p>

If your suppliers or manufacturers are VAT-registered, you’d have been charged input VAT on every purchase you’ve made from them.

<div><p>If your business is VAT-registered — whether that’s because you’ve registered voluntarily, or have surpassed the £85,000 <b><a href="https://ember.co/content/article/vat-registration-threshold" class="text-red-400">VAT registration threshold</b></a> — you’ll need to charge your customers VAT on the items you sell, known as output VAT.</div></p>

<div><p>The idea is that eventually you break even, reclaiming the input tax paid towards your supplier from the output tax paid by your consumers. When filing your VAT return, you’ll need to keep track of these figures, with the difference between your output VAT and input VAT determining either what your final <b><a href="https://ember.co/content/article/how-to-pay-your-uk-vat-bill" class="text-red-400">VAT bill</a></b> looks like, or how much you can expect in a VAT refund.</div></p>

<div><p>Keep in mind that some goods and services are not charged VAT, yet depending on the item may need to be included in your VAT return. For the differences between zero-rated goods, out-of-scope goods and VAT exempt goods, head over to our guide to <b><a href="https://ember.co/content/article/vat-exemption" class="text-red-400">VAT exemption</a></b>.</div></p>

What’s the difference between a VAT receipt and a VAT invoice?

Broadly speaking, a VAT invoice is the same thing as a VAT receipt, yet VAT invoices tend to be used to record business expenses more frequently than VAT receipts.

For example, if you were to buy a laptop for £500 as an individual for personal use, you’d be issued a receipt from the till which would state the rate of VAT you’d paid. However, if you’d spent the same amount on a laptop for business use, you’d be issued a VAT invoice, too.

There are slightly different rules when it comes to retailers selling goods for under £250. In this instance, a retailer can issue a simplified VAT invoice, and will only need to issue a full VAT invoice if the customer requests one.

To successfully reclaim VAT, you’ll have to present the original purchase receipt to HM Revenue and Customs (HMRC), otherwise known as the VAT invoice.

A valid VAT receipt will include the following details:

<div><ul>
<li><b><a href="https://ember.co/content/article/what-is-a-vat-number" class="text-red-400">VAT registration number</a></b> of seller</li>
<li>A list of the purchased goods</li>
<li>Unique <b><a href="https://ember.co/content/article/what-is-an-invoice-number" class="text-red-400">invoice number</a></b></li>
<li>Business address of both the buyer and seller</li>
<li>Tax date (date of supply)</li>
<li>Business name of both the buyer and seller</li>
<li>Receipt issuance date</li>
</div></ul>

If any of this information is missing or incorrect, you might not be able to claim back VAT. Further examples of VAT receipts that aren’t valid include: delivery notes, letters or emails.

<div><p>Take some time to check over your invoices to save yourself a future headache. Or, <b><a href="https://ember.co/book-accountant-call" class="text-red-400">get in touch with our accountants</a></b> instead — we’ll happily take the weight off your shoulders.</div></p>

What does a simplified VAT receipt look like?

Not every VAT receipt needs to include all of the above details. If requested, retailers can issue simplified VAT receipt for sales under £250 including VAT.

Simplified VAT receipts are shorter, but they still provide the customer with everything that is legally required.

<div><ul>
<li>Supplier name and business address</li>
<li>Supplier <b><a href="https://ember.co/content/article/what-is-a-vat-number" class="text-red-400">VAT registration number</a></b></li>
<li>Date of supply, or the <b>tax point</b></li>
<li>A description of the goods or services supplied</li>
</ul></div>

<div><p>If the sale includes items charged at different VAT rates, then the simplified VAT receipt must also show the VAT rate applicable to each different item, as well as the total price including VAT. <b><a href="https://ember.co/content/article/vat-exemption" class="text-red-400">VAT exempt supplies</a></b>, such as postage stamps, must not be included on simplified invoices or modified VAT invoices.</div></p>

It’s easy to lose VAT receipts, especially if you’ve just bought something small or from a local corner shop.

HMRC will accept alternative evidence if you have lost a few VAT receipts of small value (i.e. the odd £10). In these instances, you’ll need to support your claim with alternative information, e.g. a bank statement or credit card, as proof of payment.

If you’re losing VAT receipts a lot, though, then you should practice some good record-keeping. Read on — we’ve got you covered.

Keeping hold of valid VAT receipts means that you’ll be able to prove how much VAT you’ve paid. And how much you’ve legally claimed back on your VAT returns, in case of inspection.

💡Top tip: If you’ve paid VAT on a business expense, be sure to check the receipt for the VAT you’ve been charged. More often than not, business owners walk away from a transaction with receipt in hand, only to find the VAT isn’t actually included on the receipt. If you can’t find the VAT you’ve been charged on the receipt, be sure to request a VAT receipt from the supplier as soon as possible.

Every VAT-registered business must keep a VAT account. This will be a huge help when it comes to filling out your VAT return.

You can keep the VAT account whichever way suits your business best, but here’s the information you’ll need to track:

<div><ul>
<li><b>Output tax</b> owed on sales</li>
<li><b>Output tax</b> owed on acquisitions made before 1 January 2020 (for those registered in Great Britain)</li>
<li>Tax you’re required to pay on behalf of a supplier under a <b>VAT reverse charge procedure</b></li>
<li>Tax that needs to be paid following a correction or error adjustment</li>
<li>Any other <b><a href="https://www.gov.uk/guidance/record-keeping-for-vat-notice-70021#adjusting-vat-account" class="text-red-400">adjustment</a></b> required by the VAT rules</li>
<div></ul>

<div><p>💡Did you know you can generate, review and submit your VAT Returns directly to HMRC from your Ember account? <b><a href="https://ember.co/" class="text-red-400">Give us a go today</a></b>.</div></p>

VAT accounts vary from business to business, but here's an example of what yours might look like:

<div><table>
<tr>
<th>Input tax</th>
<th>£</th>
<th>Output tax</th>
<th>£</th>
</tr>
<tr>
<th>VAT paid on business expenses</th>
<th></th>
<th>VAT charged on sales</th>
<th></th>
</tr>
<tr>
<td>January</td>
<td>2,215.23</td>
<td>January</td>
<td>2,780.23</td>
</tr>
<tr>
<td>February</td>
<td>1,626.47</td>
<td>February</td>
<td>2,305.81</td>
</tr>
<tr>
<td>March</td>
<td>2,792.01</td>
<td>March</td>
<td>3,302.45</td>
</tr>
<tr>
<td>Sub-total</td>
<td>6,633.71</td>
<td>Sub-total</td>
<td>8,388.49</td>
</tr>
<tr>
<td>Other adjustments (specify)</td>
<td></td>
<td>Other adjustments (specify)</td>
<td></td>
<tr>
<tr>
<td>Total tax deductible</td>
<td>6,633.71</td>
<td>Total tax payable</td>
<td>8,388.49</td>
</tr>
<tr>
<td></td>
<td></td>
<th>Payable to HMRC</th>
<td>1,754.78</td>
</tr>
</table></div>

This can then be used to fill in your VAT Return. Your VAT return and payment are both due within a month after your accounting period ends.

You must keep a copy of every VAT invoice you issue, and VAT receipt you’re given, for up to 6 years.

If you’re not able to present valid VAT invoices, HMRC could demand you pay back the VAT you’ve claimed, alongside any penalties they may charge.

<div><p>Not only is storing <b><a href="https://ember.co/content/article/vat-records-making-tax-digital" class="text-red-400">digital VAT records</a></b> paramount to keeping organised, it's also core to <b><a href="https://ember.co/content/article/making-tax-digital" class="text-red-400">Making Tax Digital</a></b> for VAT. As of <b><a href="https://ember.co/content/article/making-tax-digital-timeline" class-"text-red-400">April 2022</a></b>, <b><a href="https://ember.co/content/article/do-i-need-to-register-for-making-tax-digital" class="text-red-400">all VAT-registered business owners</a></b> must store digital records and file their VAT returns electronically, unless you are exempt.</div></p>

<div><p>Since paper records are a thing of the past under MTD, you’ll need to store your VAT receipts digitally using <b><a href="https://ember.co/content/article/mtd-for-vat-online-software" class="text-red-400">MTD-compatible accounting software</a></b>. If you're looking for a MTD-compliant VAT digital software, look no further than <b><a href="https://ember.co/content/article/ember-making-tax-digital-for-vat" class="text-red-400">Ember</a></b>. We’d love to help out.</div></p>

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