How To Complete A VAT Return For UK Businesses 2026

To complete a VAT return, you add up the value added tax (VAT) you've charged on your sales and the VAT you've paid on business purchases, enter those figures in the nine boxes of the return using Making Tax Digital (MTD) compatible software, then submit it to HM Revenue and Customs (HMRC). Most businesses file every three months, and both the return and any VAT you owe are usually due one calendar month and seven days after the end of the period.

What is a VAT return?

A VAT return is a form you send to HMRC that shows how much VAT you've charged your customers and how much VAT you've paid to other businesses over a set period, known as your VAT period or accounting period. For most businesses, that period is three months. The difference between the two figures decides what happens next. If you've charged more VAT than you've paid, you pay the difference to HMRC. If you've paid more than you've charged, HMRC repays the difference to you. Every VAT registered business has to submit a return for each period, even if there's no VAT to pay or reclaim. A return with nothing to report is known as a nil return, and it still has to be filed on time.

What do you need to complete a VAT return?

Getting your records in order first makes the return itself much quicker. Before you start, make sure you have the following:

You'll need accounting software that's compatible with Making Tax Digital, since all VAT registered businesses must keep digital records and submit returns through MTD software unless HMRC has granted an exemption.
You'll need copies of every sales invoice you issued and every purchase invoice you received in the period, including any credit notes.
You'll need a valid VAT invoice for each purchase you plan to reclaim VAT on, because HMRC won't accept a pro forma invoice, statement or delivery note.
You'll need the start and end dates of your VAT period, which you can find in your VAT online account.
You'll need records of anything unusual in the period, such as imports, goods taken for personal use or bad debts you're claiming relief on.

Under MTD rules, figures must move between your systems through a digital link. That could be linked spreadsheets, a file import or a direct connection between your bookkeeping software and your bank. Copying and pasting or retyping figures from one program into another doesn't count.

How do you do a VAT return step by step?

Completing a VAT return comes down to six steps. If your bookkeeping software is up to date, it will calculate most of the figures for you, but it's still worth understanding what each step involves so you can spot anything that looks wrong.

1. Check your VAT period and deadline

Confirm the dates your return covers and when it's due. Only include sales and purchases with a tax point inside those dates. The tax point is usually the date you supply the goods or services, or the invoice date if you issue the invoice within 14 days of the supply. If you use the cash accounting scheme, you go by the date you're paid or pay your supplier instead.

2. Work out the VAT on your sales

Add up the VAT you've charged customers on everything you sold in the period. This is called output tax. Take off the VAT on any credit notes you issued, then add VAT on other items such as goods you took out of the business for personal use.

3. Work out the VAT you can reclaim

Add up the VAT you've paid on business purchases and expenses. This is called input tax. You can only reclaim VAT on costs used for your business, so leave out VAT on business entertainment and anything bought for personal use. Take off the VAT on any credit notes you received from suppliers.

4. Fill in the nine boxes

Your software will place your figures in the nine boxes of the return. The table in the next section explains what belongs in each one.

5. Check your figures and submit

Before you submit, compare the totals with your previous returns. A sudden jump or drop is worth checking, as it often points to a missing invoice or one entered twice. Once you're happy, submit the return through your MTD software and keep the confirmation HMRC sends back.

6. Pay your VAT bill or wait for your repayment

If Box 5 shows VAT to pay, make sure the payment reaches HMRC by the deadline. If it shows a repayment, HMRC usually pays within 30 days of receiving your return, straight into your bank account if you've given HMRC your bank details.

What goes in each box of a VAT return?

A VAT return has nine boxes. Boxes 1 to 5 work out how much VAT you owe or are owed, while boxes 6 to 9 report the value of your sales and purchases. The descriptions below are based on HMRC's guidance on filling in a VAT return.

Box	What it shows	What to include
Box 1	VAT due on sales	The VAT you've charged on all sales in the period, less the VAT on credit notes you've issued
Box 2	VAT due on goods brought into Northern Ireland from the EU	Only relevant if you buy goods from VAT registered EU suppliers into Northern Ireland
Box 3	Total VAT due	Box 1 plus Box 2
Box 4	VAT reclaimed on purchases	The VAT you've paid on business purchases and imports, less the VAT on credit notes you've received
Box 5	Net VAT to pay or reclaim	The difference between Box 3 and Box 4
Box 6	Total sales, excluding VAT	All sales, including zero rated, reduced rate and exempt sales and exports
Box 7	Total purchases, excluding VAT	All purchases and expenses, including imports
Box 8	Goods sent from Northern Ireland to the EU, excluding VAT	Only relevant if you dispatch goods from Northern Ireland to EU countries
Box 9	Goods brought into Northern Ireland from the EU, excluding VAT	Only relevant if you buy goods from VAT registered EU suppliers into Northern Ireland

If you don't trade goods between Northern Ireland and the EU, boxes 2, 8 and 9 will usually be zero.

Boxes 6 and 7 trip up more businesses than any others, because some money coming in or going out isn't a sale or a purchase. Leave the following out of these boxes:

Leave wages, salaries, PAYE and National Insurance out of Box 7.
Leave business rates, MOT certificates and vehicle tax out of Box 7.
Leave loans, dividends and insurance claims out of both boxes, along with money you put into or take out of the business yourself.

What does a completed VAT return look like? An example

Here's an example of a VAT return for a business that only trades in the UK and charges the standard 20% rate. In one quarter, it makes sales of £50,000 plus £10,000 VAT, and buys stock and other business costs of £20,000 plus £4,000 VAT. It also pays £15,000 in wages, which have no VAT on them.

Box	Figure	How it's worked out
Box 1	£10,000	VAT charged on £50,000 of sales
Box 2	£0	No goods brought into Northern Ireland from the EU
Box 3	£10,000	Box 1 plus Box 2
Box 4	£4,000	VAT paid on £20,000 of business purchases
Box 5	£6,000	Box 3 minus Box 4, so this is the VAT to pay
Box 6	£50,000	Total sales, excluding VAT
Box 7	£20,000	Total purchases, excluding VAT and leaving out wages
Box 8	£0	No goods sent from Northern Ireland to the EU
Box 9	£0	No goods brought into Northern Ireland from the EU

In this example, the business owes HMRC £6,000 for the quarter. If its purchases had included VAT of more than £10,000, for example after buying new equipment, Box 5 would show a repayment from HMRC instead.

Which VAT schemes change how you complete your return?

If you've joined one of HMRC's VAT accounting schemes, the way you work out your figures is different. These are the three schemes most likely to affect a small business:

The Flat Rate Scheme is open to businesses with a VAT turnover of £150,000 or less, excluding VAT. You pay a fixed percentage of your VAT inclusive turnover rather than working out output tax minus input tax, and you can't usually reclaim VAT on purchases, apart from certain capital assets over £2,000.
The Cash Accounting Scheme is open to businesses with a VAT taxable turnover of £1.35 million or less. You account for VAT when your customers pay you and when you pay your suppliers, rather than on invoice dates.
The Annual Accounting Scheme is also open to businesses with a VAT taxable turnover of £1.35 million or less. You submit one return a year instead of four, and make advance payments towards your VAT bill during the year.

When is a VAT return due and how do you pay?

Your VAT return and payment are usually due one calendar month and seven days after the end of your VAT period. For a quarter ending on 31 March, that means both are due by 7 May. The deadline still applies if it falls on a weekend or bank holiday. The payment must have cleared into HMRC's account by the deadline, not just left yours, so allow time for it to arrive. You can pay by bank transfer, online by card or by Direct Debit. If you pay by Direct Debit, set it up at least three working days before you submit your return. HMRC then collects the payment three working days after the deadline, which gives you a few extra days of cash in the bank.

Since VAT you charge customers isn't your money to keep, it helps to set it aside as it comes in rather than finding the full amount on the due date. A cash flow forecast shows how each quarterly VAT bill fits alongside your other costs, so you can see well in advance whether the money will be there.

How do you correct a mistake on a VAT return?

You can fix most mistakes on a past VAT return by adjusting your next one, using Box 1 for VAT you underdeclared on sales and Box 4 for VAT you didn't reclaim on purchases. You can correct errors from the last four years this way if the net error is either:

£10,000 or less.
Between £10,000 and £50,000, and no more than 1% of the Box 6 total on the return for the period you discovered it.

If the error is bigger than these limits, or it was deliberate, you need to tell HMRC about it separately rather than adjusting your next return. You can do this through HMRC's online error correction service or in writing to HMRC's VAT Error Correction Team. You can also choose to report a smaller error this way if you prefer. Whichever route you take, keep a record of what went wrong and how you corrected it.

What happens if you submit or pay your VAT return late?

HMRC uses a points system for late returns and a separate set of charges for late payment, so filing and paying on time both matter. Each return you submit late earns one penalty point, including nil returns and returns where HMRC owes you money. Once you reach the threshold for your filing frequency, you'll be charged a £200 penalty for that return and another £200 for every further late return.

How often you file	Penalty point threshold
Annually	2 points
Quarterly	4 points
Monthly	5 points

If you pay late, late payment interest is charged from the first day the payment is overdue at the Bank of England base rate plus 4%. Late payment penalties apply on top of that interest:

There's no penalty if you pay in full within 15 days of the deadline.
If your payment is 16 or more days overdue, you'll be charged a penalty of 3% of what you still owed at day 15.
If your payment is 31 or more days overdue, that penalty increases by a further 3% of what you still owed at day 30.
From day 31, a second penalty builds up daily at a rate of 10% a year until the bill is paid.

If you won't be able to pay in full, you may be able to agree a Time to Pay arrangement with HMRC to spread the bill over a set period. Agreeing one can reduce or remove late payment penalties, as long as you keep to its terms.

Pay your VAT bill on time with a VAT loan

If your VAT bill is larger than expected or lands at a point when cash is tight, a VAT loan lets you pay HMRC in full and on time, then spread the cost over a fixed term. That means no late payment penalties, no penalty interest and no strain on the cash you need to run your business day to day. Capitalise can help you compare VAT loans from our panel of lenders with a single application, and a dedicated funding specialist will guide you through to funding.

How to complete a VAT return in the UK