How to Submit a VAT Return in 2026: Step-by-Step UK Guide

What is a VAT Return?

A VAT return is the form VAT-registered businesses or individuals fill in to tell HM Revenue and Customs (HMRC) how much VAT they have charged other businesses or end consumers and how much they have paid to other businesses. All VAT records and submissions of the form must normally be in a Making Tax Digital (MTD)-recognised digital format. Most businesses are required to file a return four times a year. The VAT form shows the amount of VAT the business or individual owes HMRC, or the amount that is owed to them.

VAT registration is mandatory for businesses if their VAT-taxable turnover is more than £90,000. Some businesses and individuals volunteer to register even if their turnover falls below the threshold. This can be done to enhance their reputation or improve their cash flow by reclaiming VAT on purchases.

Although registering for VAT can increase administrative and bookkeeping expenses, they are normally fully tax deductible (provided they relate wholly and exclusively to running the business).

Importance of submitting a VAT Return

Once registered, businesses are legally required to charge VAT on their sales (VAT output tax) and reclaim VAT on their business-related purchases (VAT input tax). Since 1 April 2022, all VAT-registered businesses or individuals must make VAT submissions and pay what they owe electronically to comply with Making Tax Digital for VAT (MTD VAT).

It is vital that your VAT return is accurate and filed on time (normally four times a year). Inaccurate or late returns can result in penalty points, penalties and interest. By completing the form correctly and submitting it on time, you can avoid penalties and interest from HMRC. See more information about filing a VAT Return at https://www.gov.uk/vat-returns.

VAT Return Submission Checklist

Before submitting your VAT return, make sure you:

• Have up-to-date digital VAT records
• Reconcile sales and purchase invoices
• Verify VAT invoices for reclaimable expenses
• Check VAT calculations for accuracy
• Review adjustments and corrections
• Confirm your Making Tax Digital (MTD) software is connected to HMRC
• Submit your return and pay any VAT due before the deadline

Completing these checks before filing can help reduce errors, avoid HMRC queries and minimise the risk of penalties.

Step-by-Step Guide to Completing and Submitting Your VAT Return

Here is how to submit a VAT return in the UK, step by step:

1. Keep your VAT records in MTD-compatible software throughout the period.
2. Reconcile your sales and purchase invoices against your bank records.
3. Let your software calculate the figures for the nine VAT return boxes, or enter them.
4. Check the figures against your records before you file.
5. Sign in to your software, or to your HMRC VAT online account through your Government Gateway, and submit the return digitally.
6. Pay any VAT due by the deadline, or note the refund HMRC owes you.

Preparing your documents

Organisation is the key to avoiding leaving anything out and making errors on your VAT return. All your financial records relevant to your VAT return should be easily accessible in your digital records.

Legally, you must keep digital records of the following:

• The VAT on goods and services you supply (supplies made)
• The VAT on goods and services you receive (supplies received)
• The time of supply and value of supply (value excluding VAT) for everything you buy and sell
• Any adjustments you make to a return
• Reverse charge transactions (records of VAT on both the sale price and the purchase price of goods and services you buy)
• Any VAT accounting schemes you use
• Your total daily gross takings if you use a retail scheme
• Items you can reclaim VAT on if you use the Flat Rate Scheme
• Your total sales and the VAT on sales if you trade in gold and use the Gold Accounting Scheme

You must also keep digital copies of documents that cover multiple transactions made on behalf of your business by volunteers (charity fundraising), a third-party business, and employees’ petty cash expenses.

Stay up to date with HMRC VAT guidance, including VAT rates, exemptions and reporting requirements. Since there is no defence in law for ignorance, you are obliged to know the rules and use them as you fill out your VAT return.

Understanding the VAT Return boxes

The UK VAT return has nine boxes. Here is what each one captures:

Here is what each box means in more detail:

Box 1: VAT due on sales and other outputs (output VAT). This should include the total amount of VAT you have charged on all goods and services during the return period.

Box 2: VAT due on the acquisition of goods. Complete this box for goods acquired in Northern Ireland from EU member states, but only in relation to the VAT return period in question.

Box 3: Total VAT due. Add together the figures from Box 1 and Box 2 to reach the VAT due figure for the return period.

Box 4: VAT reclaimed in the period (input VAT). An important rule applies here: VAT is only recoverable on purchases with a valid VAT invoice or other verifiable commercial documentation.

Box 5: Net VAT to pay or reclaim from HMRC. Taking the figures from Box 3 and Box 4, deduct the smaller figure from the larger one and put the difference in Box 5. If the figure in Box 3 is greater than Box 4, this is the VAT you need to pay to HMRC. If Box 3 is less than Box 4, this is the VAT you can reclaim.

Box 6: Total value of sales and other outputs. Enter the total value (excluding VAT) of sales and other outputs made during the return period.

Box 7: Total value of purchases and other inputs. Enter the total value of purchases and other inputs made during the return period (excluding VAT).

Box 8: Supplies of goods (including related costs) from Northern Ireland to EU member states. Only complete this box if you dispatch goods from Northern Ireland to EU member states. Include the value of these sales (excluding VAT) and any related costs. The value in Box 8 must correspond with the figure given in Box 6.

Box 9: Acquisition of goods (including related costs) from EU member states to Northern Ireland. Only complete Box 9 if you acquire goods destined for Northern Ireland from EU member states. Include the value of these acquisitions (excluding VAT) and any related costs. The value in this box must correspond with the figure given in Box 7.

Calculating input and output tax

Input VAT is the VAT on goods and services a VAT-registered business purchases. To calculate input VAT, add up the total amount of VAT on purchases your business has made during the period. The purchases must relate to taxable business activities.

Example: assume the standard VAT rate of 20% applies to all purchased items, and the purchases are valued at £20,000. The input VAT total is £4,000.

Output VAT is the VAT added to goods and services sold by a VAT-registered business to its customers, including other businesses and end consumers.

Example: in the same VAT period, your business sold goods with a value of £50,000 (excluding VAT, at the 20% rate). The output VAT total is £10,000.

Taking these two examples, you deduct the lower figure (input tax) from the higher one (output tax) to work out how much VAT you need to pay HMRC for that period. So, based on this example (£10,000 less £4,000 = £6,000), you owe HMRC £6,000. If the VAT on your business’s purchases is greater than the VAT charged on sales, this is what you can reclaim from HMRC via your VAT return.

Methods of VAT Return Submission

Online submission via the HMRC Portal

Ideally, businesses should register for VAT online through the HMRC website. There are circumstances where a business may register using the VAT1 form. Once registered for VAT and issued with a VAT registration number, you can access your VAT account through your Government Gateway credentials and submit VAT returns digitally. Note that HMRC’s MTD for VAT automatically enrols all VAT-registered businesses unless they are already exempt or have applied for an exemption.

An alternative VAT return submission method is to use accounting software that is compatible with HMRC’s systems.

Using cloud accounting software for VAT Returns

You are legally obliged to keep VAT records and submit your VAT returns to HMRC using bookkeeping and accounting software that is compatible with MTD for VAT. If you prefer, you can submit your VAT return using your chosen compatible software rather than the HMRC VAT portal. It must be either:

• a compatible software package that allows you to keep digital records and submit VAT returns, or
• bridging software to connect non-compatible software (like spreadsheets) to HMRC systems

Common Mistakes and How to Avoid Them

Frequent errors in VAT calculations

Three common errors in VAT returns and calculations relate to vehicles, fuel and entertainment.

1. VAT on motor vehicles (cars, motorbikes, vans). You should not try to claim the input tax on motor vehicles unless you can prove the vehicle is not available for private use (as opposed to simply not used for private purposes). The same rule restricts the input tax on vehicle leases to 50% of the lease payments. For VAT purposes, a vehicle with a payload of over one tonne is classified as a commercial vehicle.
2. VAT on fuel. To reclaim fuel input tax, the fuel must have been used wholly and exclusively for running the business. You must keep detailed mileage records or apply the scale charge to the output tax (assuming there is some private use for the fuel purchased). The chosen method must be applied across all the company’s vehicles, which means the scale charge will also apply to commercial vehicle fuel. You will be asked to provide fuel receipts to support the VAT you want to recover from HMRC.
3. VAT on entertainment. HMRC strictly enforces its rules on recovering input tax on business entertainment (apart from staff entertainment). No input tax on entertainment that is not for the business’s staff is recoverable. Taking a client to lunch is only business entertainment when certain conditions are met, and corporate hospitality events are unlikely to be eligible for a VAT reclaim.

There are numerous other common errors associated with VAT. You must stay abreast of the rules if you are looking after your own VAT administration.

Ensuring accurate information

The penalties, interest and other measures HMRC can apply for inaccurate information on a VAT return should keep you focused on accuracy.

The positive news is that, if you are reluctant to hire an accountant to look after all your VAT administration, there are various bookkeeping and accounting software packages that can help you improve accuracy and submit electronically through the VAT online service. That said, despite the sophistication of these cloud solutions, they cannot replace the benefits of having a qualified accountant look after your VAT returns. Remember that your bookkeeping and accounting fees are tax deductible.

VAT Return Deadlines and Penalties

Key submission deadlines

Typically, your VAT return covers a period of three months. The deadline for submitting your VAT return and paying whatever you owe is usually one calendar month and seven days after the end of your VAT accounting period.

Consequences of late or incorrect submissions

Inaccurate or late VAT returns can attract penalty points, penalties and interest. For periods starting on or after 1 January 2023, you receive a penalty point for each late return, and once you reach the threshold for your filing frequency a £200 penalty applies. Deliberate VAT fraud or evasion is treated far more seriously and can lead to prosecution and, in serious cases, imprisonment.

HMRC charges interest on any VAT not paid by the accounting period’s deadline, with separate rates for underpaid and overpaid VAT. Visit https://www.gov.uk/submit-vat-return/interest-underpaid-overpaid-vat to learn more.

Tools and Resources for Efficient VAT Management

Recommended accounting software and helpful resources

See the list of software that HMRC has verified as compatible with MTD for VAT: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat.

Popular Making Tax Digital (MTD) software options used by UK businesses include QuickBooks, Xero, Sage and FreeAgent. Businesses should choose software that suits their size, industry and reporting requirements.

Online bookkeeping and accounting firms also provide MTD-compatible software products as part of their packages, so it is worth doing your research before you commit. You should not feel that self-administering the VAT return process is the only option open to you.

Industry-Specific VAT Return Considerations

VAT in different business sectors and special VAT schemes

The VAT schemes are, according to HMRC, designed to simplify the way some VAT-registered businesses calculate and account for VAT.

Which scheme suits you depends on your type of business and VAT-taxable turnover. For businesses whose VAT-taxable turnover is £1.35 million or less, the VAT Annual Accounting Scheme (where you complete one VAT return each year instead of four) might be an option. There is also the VAT Cash Accounting Scheme, where you pay VAT to HMRC when your customer pays you rather than when you invoice them.

The VAT Margin Scheme may suit businesses selling second-hand goods, art, antiques or collectibles. Here, VAT is paid on the difference between what you paid for an item and what you sell it for, rather than on the full selling price. Separately, HMRC also offers retail schemes, which help shops making many low-value sales work out their VAT without calculating it on every single sale.

The HMRC website offers a full list of VAT schemes, some of which can be used in combination. This is why VAT is an area where the expertise of an accountant can pay dividends. It is advisable to take advice from an accountant before choosing a scheme.

Expert Tip

One of the most common causes of VAT errors is incomplete bookkeeping. Before submitting a VAT return, reconcile your sales invoices, purchase invoices and bank transactions to ensure all transactions have been recorded correctly. A final review before submission can significantly reduce the risk of HMRC enquiries, penalties and costly corrections.

Best Practices from VAT Experts: Four Tips for Staying Compliant

1. Stay up to date with VAT rules. VAT legislation and HMRC guidance can change regularly. Review the latest updates, notices and guidance to stay compliant. Subscribing to HMRC email updates and attending HMRC webinars can help you keep track of important changes.
2. Maintain accurate digital records. Accurate record-keeping is the foundation of VAT compliance. Ensure your accounting software integrates with your invoicing, banking and bookkeeping processes so that VAT calculations are based on complete and up-to-date information.
3. Seek professional advice when needed. VAT can be complex, particularly for businesses dealing with international trade, partial exemptions or specialist VAT schemes. Advice from a qualified accountant or VAT specialist can help you avoid costly mistakes and find opportunities to improve efficiency while remaining compliant.
4. Use the right technology and processes. Making Tax Digital (MTD)-compatible software can simplify VAT record-keeping and submissions. Combining reliable accounting software with regular bookkeeping reviews and professional oversight can help reduce errors and support ongoing compliance with HMRC requirements.

Updates and Changes in VAT Legislation

VAT legislation changes regularly, so it is essential for businesses to stay informed about the latest HMRC guidance and compliance requirements.

• The VAT registration threshold remains £90,000 in 2026. Businesses approaching the threshold should monitor their taxable turnover regularly to ensure they register on time.
• Standard-rate VAT continues to apply to independent school fees under the rules introduced from January 2025.
• The VAT One Stop Shop (OSS) scheme continues to help eligible businesses simplify VAT reporting for certain cross-border sales involving Northern Ireland and EU member states.
• Place of supply rules remain an important area of VAT compliance for businesses trading internationally. Determining where VAT is due can be complex and may require professional advice.
• HMRC continues to expand digital compliance under Making Tax Digital (MTD). Businesses should keep accurate digital records and monitor future announcements on digital reporting and e-invoicing.

Conclusion

Submitting an accurate VAT return requires good record-keeping, a clear understanding of HMRC requirements and careful review before filing. Staying compliant with VAT rules can help businesses avoid penalties, improve cash flow and reduce the risk of HMRC enquiries.

A VAT health check, to make sure your records are accurate and that you are using the most suitable VAT scheme, can make the submission process smoother. An accountant can help you claim available VAT reliefs, manage VAT reclaims correctly and reduce the risk of errors that lead to penalties or interest.

For accountancy and bookkeeping firms looking for cloud-based accounting support during busy periods, Outbooks provides outsourced accounting and bookkeeping services that help practices operate more efficiently while continuing to deliver excellent service to their clients.

Frequently Asked Questions

How do I submit a VAT return online in the UK?

Sign in to your VAT account with HMRC or use Making Tax Digital (MTD)-compatible accounting software. Once logged in, complete the VAT return boxes and submit digitally.

Can I submit a VAT return without an accountant?

Yes, you can submit a VAT return yourself using HMRC’s online VAT account or approved MTD software. However, using an accountant reduces the risk of errors, penalties and late submissions.

How often do you need to submit a VAT return?

Most VAT-registered businesses submit VAT returns quarterly, although some schemes allow annual submissions. Your frequency depends on your VAT accounting scheme.

What information is required to submit a VAT return?

You need details of VAT charged on sales (output VAT), VAT paid on purchases (input VAT), total sales and purchases excluding VAT, and any adjustments or VAT scheme calculations.

What happens after submitting a VAT return?

HMRC confirms receipt of your return. If VAT is due, payment must be made by the deadline. If you are due a refund, HMRC usually repays it within 30 days of receiving your return.

Can I submit a VAT return late?

Yes, but a late VAT return can result in penalty points, penalties and interest. Repeated late submissions increase the risk of financial penalties.

Do I need Making Tax Digital software to submit a VAT return?

Yes. Most VAT-registered businesses must use Making Tax Digital (MTD)-compatible software to keep records and submit VAT returns digitally, unless exempt.

Can I amend a VAT return after submission?

You cannot edit a submitted VAT return directly. Minor errors can be adjusted in your next return, while larger errors must be disclosed to HMRC separately.