Filing your VAT (Value Added Tax) return online might seem like a daunting task, especially if you’re a small business owner, freelancer, or new bookkeeper navigating HMRC’s Making Tax Digital (MTD) rules for the first time. Between gathering the right records, understanding the 9-box format, and making sure everything is MTD-compliant, there’s a lot to consider.
A VAT return is a document you submit to HMRC, usually every quarter, that details the VAT you’ve charged on your sales (output VAT) and the VAT you’ve paid on your purchases (input VAT). The difference between the two tells you how much VAT to pay or reclaim.
This guide will walk you through everything you need to know, from preparing your records and choosing the right accounting software to completing your return step-by-step and avoiding the most common mistakes that trip up new filers.
Difference Between Input VAT and Output VAT
| Feature | Input VAT | Output VAT |
| Definition | VAT you pay on business-related purchases and expenses | VAT you charge your customers on sales |
| Purpose | Can be reclaimed from HMRC | Must be paid to HMRC |
| Examples | VAT on office supplies, equipment, fuel, or professional services | VAT on products or services sold to customers |
| Accounting Treatment | Recorded as an asset (recoverable VAT) | Recorded as a liability (VAT payable) |
| Impact on Business | Reduces the total VAT owed to HMRC | Increases the total VAT payable to HMRC |
| Included in | VAT return (deducted from output VAT) | VAT return (total VAT collected from customers) |
| Cash Flow Effect | Helps recover VAT on purchases | Adds VAT on top of selling price |
When Do You Need to Do a VAT Return?
If your business is VAT-registered, you’re required to submit a VAT return, usually every quarter (every 3 months). This return is a summary of how much VAT:
- You’ve charged your customers (output VAT)
- You’ve paid on business purchases (input VAT)
Based on this, HMRC determines whether:
- You owe VAT (if output VAT is more than input VAT), or
- You’re due a VAT refund (if input VAT is more than output VAT)
VAT Return Deadlines
Most businesses operate on a quarterly VAT return cycle. Here’s what you need to know:
- You must submit your VAT return within 1 calendar month and 7 days after the end of your VAT period
- VAT payment is also due by the same deadline
For example, if your VAT quarter ends on 31 March, your return and payment must reach HMRC by 7 May.
Gather Your Financial Records
Before you file your VAT return, make sure you’ve gathered all the key financial records for the period you’re reporting on. Good preparation makes the process smoother and helps reduce the chance of mistakes.
The main records you’ll need include:
- Sales invoices showing how much VAT you’ve charged your customers.
- Purchase receipts to check how much VAT you can claim back.
- Bank statements to match payments and confirm your transactions.
- Your VAT certificate which includes your VAT registration number.
- Invoices for overseas trade especially if you’ve dealt with EU countries.
Understand Your VAT Scheme
How you calculate your VAT return depends on the type of VAT scheme your business is using. Here’s a quick breakdown:
Standard VAT Scheme
You record VAT based on the date on the invoice, whether or not you’ve been paid.
Cash Accounting Scheme
You only record VAT when you get paid by customers or pay your suppliers.
Flat Rate Scheme
You pay a set percentage of your total sales to HMRC. You usually can’t claim back VAT on purchases, except in some cases.
Annual Accounting Scheme
You send one VAT return each year, but make advance payments throughout the year to spread the cost.
Always check which VAT scheme you’re on before doing your return, as it affects how and when your VAT is reported.
Use MTD-compatible accounting software
Since Making Tax Digital became mandatory for VAT registered businesses earning over £85,000, you must use MTD-compatible accounting software to keep digital records and submit VAT returns. Popular options include QuickBooks, Xero, and Sage, these link directly to your HMRC VAT online account via gov.uk.
The Step-by-Step Guide to Fill Online VAT Return
Once your records are ready, here’s how to file a VAT return online using HMRC’s VAT portal and MTD software.
Step 1: Log into your Government Gateway account
Visit gov.uk and sign in with your Government Gateway credentials. If you don’t already have an account, you’ll need to register and link your VAT registration number to your profile.
Make sure your business is signed up for Making Tax Digital before trying to file via software.
Step 2: Navigate to the VAT section
Once logged in:
- Select ‘Your business taxes’.
- Choose ‘VAT’.
- You’ll see the option to submit your VAT return using accounting software if MTD applies.
If you’re using bridging software or a platform like Cloud Co Books, you’ll be directed to the integrated submission portal.
Step 3: Complete the 9 Boxes of the VAT Return
Each VAT return contains 9 boxes. Here’s a simple breakdown of what each means:
- Box 1: VAT due on sales and other outputs. This is your output VAT.
- Box 2: VAT due on acquisitions from other EU countries (only if applicable).
- Box 3: The total of Boxes 1 and 2: your total VAT due.
- Box 4: VAT you’re reclaiming on purchases: your input VAT.
- Box 5: Net VAT to be paid to HMRC or reclaimed. It’s Box 3 minus Box 4.
- Box 6: Total value of sales and other outputs, excluding VAT.
- Box 7: Total value of purchases and inputs, excluding VAT.
- Box 8: Value of goods supplied to other EU Member States.
- Box 9: Value of goods acquired from EU Member States.
Tip: Always double-check that you’re entering amounts excluding VAT in Boxes 6–9.
Step 4: Review and double-check
Review your return carefully. Check that the figures match your accounting software and supporting records. Pay close attention to:
- Transposition errors (e.g., £2,315 vs. £2,135)
- Omitting zero-rated or exempt sales
- Incorrect classification of capital goods and services
Also verify that the return covers the correct VAT period—whether monthly, quarterly, or annually.
Step 5: Submit and save your confirmation
Once you’re confident all the numbers are accurate:
- Click Submit VAT return
- Wait for the confirmation message from HMRC
- Download or print the submission receipt for your records
Under MTD rules, you must keep digital copies of this return, your invoices, and your calculations for at least six years.
After You’ve Filed – Payments and Repayments
After you submit your VAT return, the next step is to pay your VAT or wait for a repayment.
If you owe VAT to HMRC:
You must pay your VAT bill by the 7th day after the end of the month following your VAT quarter. For example, if your VAT period ends on 31 March, payment is due by 7 May.
Accepted payment methods:
- Direct Debit
Set this up in your HMRC VAT online account. - Faster Payments or CHAPS
Pay through your online banking. - Debit or credit card
You can pay by card, but this might include extra charges
Failing to pay VAT on time may result in late VAT penalties or interest.
If HMRC owes you a repayment:
If you’ve paid more VAT on purchases than you collected on sales, you’ll be due a repayment. HMRC typically processes refunds within 10 working days, though it can vary.
Remember: repayments go to the bank account linked to your VAT registration.
Not sure what a VAT return is or why it matters? Our blog, What is VAT Return? explains the basics and how it works for your business.
Common Mistakes and How to Avoid Them
Even experienced filers make mistakes. Here are common pitfalls when filing VAT returns and how to avoid them:
1. Incorrect VAT calculations
Miscalculating the amount of VAT due or reclaimable is easy to do if you’re relying on manual spreadsheets. Use MTD software to calculate VAT accurately.
2. Reclaiming VAT on ineligible expenses
You cannot reclaim VAT on:
- Client entertainment
- Non-business travel costs
- Most exempt goods and services
Double-check what qualifies before you submit your VAT return.
3. Transposing figures or entering gross instead of net
Ensure you’re entering the net values (excluding VAT) in Boxes 6 and 7. Always double-check each figure before submission.
4. Missing the deadline
You must file VAT returns every three months, and submit them on time, seven days after the end of your VAT period. Late filings can trigger penalties and damage your compliance record.
5. Not using MTD-compliant software
It’s now a legal requirement to submit VAT returns using Making Tax Digital-compatible software unless you have an exemption.
Tip: Consider working with a qualified accountant to review your VAT returns if you’re unsure, especially for your first VAT return.
Conclusion
Filing a VAT return in the UK may seem overwhelming, but with the right preparation, tools, and knowledge, it’s entirely manageable.
From gathering your records and understanding the 9-box return, to submitting through Making Tax Digital software and handling payments or repayments, every step counts. Avoiding costly mistakes starts with good accounting software, careful checking, and timely submissions.
If you’re unsure about your VAT obligations or just want peace of mind that it’s all been done right, our expert team at CloudCo Books is here to help. We specialise in VAT compliance for small businesses, freelancers, and bookkeepers—making the process simple, accurate, and stress-free.
We can take the stress out of filing your VAT return by ensuring complete accuracy, not even the slightest error. Contact CloudCo Books today. Let us help you stay compliant, save time, and focus on growing your business.