Struggling to understand how to file your VAT return as a UK small business or sole trader? Mistakes can lead to fines, missed refunds, or compliance issues with HMRC. This 2025 guide shows you how to submit your VAT return online, accurately, and on time.
What Is a VAT Return?
A VAT return is a formal statement submitted to HMRC, typically every three months, that outlines the total Value Added Tax a business has charged on sales, known as output VAT, and the VAT paid on purchases, known as input VAT. The difference between these two amounts determines whether the business must pay VAT to HMRC or is entitled to a refund.
It’s a legal requirement for all VAT-registered businesses in the UK. Even if you have nothing to report, you must file a “nil return.”
Key Reasons to Submit VAT Returns on Time
Key Reasons for submitting VAT Returns on time because:
- It helps you stay compliant with HMRC rules
- It lets you reclaim VAT on eligible business costs
- It provides a clear record of your total sales, purchases, and VAT owed or reclaimable.
Every VAT-registered business in the UK must file these returns on time, even if no VAT is due. Keeping accurate records and using a tool like Making Tax Digital software helps ensure your returns are filed correctly and avoids penalties.
When Should You File a VAT Return?
Most businesses file quarterly. The VAT return must be submitted and any VAT due must be paid within 1 month and 7 days of the end of each accounting period.
You can also file:
- Annually (Annual VAT Accounting Scheme)
- Using Flat Rate Scheme (for simplified payments)
- Using Cash Accounting Scheme (pay based on actual cash flow)
How to File a VAT Return
Follow these simple steps to file your VAT return accurately and on time using HMRC-recognized digital tools:
- Sign in to your HMRC Government Gateway account
- Use MTD-compatible software like QuickBooks, Xero, Sage, or your own VAT filing software.
- Record input VAT and output VAT digitally.
- Calculate your VAT liability or refund using your software.
- Submit your return to HMRC through your software.
- Make payment to HMRC before the deadline if VAT is due.
What Do You Need to File a VAT Return?
To successfully submit your VAT return, make sure you have the following:
- Your Government Gateway login ID and password
- MTD-compliant accounting software like QuickBooks, Xero, or Sage
- Accurate totals for input VAT and output VAT
- Digital records of invoices and receipts
- Your 9-digit VAT registration number
Having all of this ready helps you file accurately and meet HMRC deadlines with ease.
What Happens If You File Late?
Missing a VAT return deadline can result in costly consequences. Here’s what to expect:
- HMRC charges late payment interest if you don’t pay your VAT on time
- A penalty points system applies, where repeated delays lead to fines
- You may lose the right to reclaim input VAT on business expenses
It’s always best to file on time and keep your records in order to avoid penalties.
A UK small business owner asked on Reddit who pays the fine if an accountant files a VAT return late. HMRC says the business owner is always responsible, even if an accountant makes the mistake—unless the accountant clearly broke their contract.
What Can You Reclaim in a VAT Return?
When filing your VAT return, you can claim back VAT on a wide range of business-related purchases, including:
- Goods bought for resale
- Office equipment and supplies
- Business-related travel and advertising expenses
- Services provided by other VAT-registered businesses
Claiming input VAT correctly helps reduce your overall VAT bill and improves cash flow.
What Records Do You Need to Keep?
HMRC requires all VAT-registered businesses to maintain digital records under the Making Tax Digital (MTD) initiative. You must:
- Keep sales and purchase records for at least 6 years
- Maintain a VAT account summarizing totals and calculations
- Issue and store correct VAT invoices in digital format
Using MTD-enabled software ensures your VAT records are always audit-ready and compliant.
Frequently Asked Questions
Not required, but highly recommended for complex returns. They can help you maximize VAT reclaims, avoid penalties, and navigate HMRC rules with confidence.
Filing a VAT return is mandatory for all VAT-registered businesses. It ensures accurate calculation of VAT owed or reclaimable and helps you stay compliant with HMRC regulations.
Yes, you can claim VAT back as a self-employed individual if you’re VAT-registered and your purchases are strictly for business use. Simply include the eligible expenses in your VAT return submitted to HMRC to reclaim the VAT.
Most businesses file 4 returns yearly (quarterly), but you can also opt for monthly or annual schemes depending on your VAT accounting method.