Confused by VAT? This plain English guide covers everything — from registration thresholds to MTD filing and avoiding penalties.
Home › Bookkeeping Advice › VAT Returns Guide
⚠️ Important 2026 update
Making Tax Digital (MTD) for VAT is now mandatory for all VAT-registered businesses. You must use compatible software to file your VAT returns.
-
VAT return deadlines
-
Making Tax Digital (MTD) for VAT
-
How to file a VAT return
-
HMRC VAT penalties
What is VAT and when do I need to register?
VAT (Value Added Tax) is a tax charged on most goods and services sold in the UK. As a business, you collect VAT from your customers on behalf of HMRC, then pay it over to them via a VAT return.
You must register for VAT when your VAT taxable turnover exceeds the VAT threshold . In 2026, the VAT registration threshold is £90,000 per year. You can also register voluntarily below this threshold if it benefits your business.
📊 Quick VAT facts (2026)
-
Standard VAT rate: 20%
-
Reduced rate: 5% (e.g. energy, children’s car seats)
-
Zero rate: 0% (e.g. most food, children’s clothes)
-
Registration threshold: £90,000 taxable turnover
-
Deregistration threshold: £88,000
VAT return deadlines
Most VAT-registered businesses submit quarterly VAT returns . Your VAT return deadline is one calendar month and seven days after the end of your VAT accounting period.
For example, if your VAT quarter ends 31st March, your return and payment is due by 7th May .
Missing the deadline results in penalty points — and eventually financial penalties. This is one of the biggest reasons small business owners hire a bookkeeper.
Making Tax Digital (MTD) for VAT
Since April 2022, all VAT-registered businesses must use MTD-compatible software to keep digital VAT records and submit returns directly to HMRC. You cannot manually enter figures on the HMRC website anymore.
Compatible software includes QuickBooks, Xero and Sage — all of which Julia works with at The Bookkeeping Co.
If you’re not sure whether you’re MTD compliant, get in touch — Julia can help you get set up quickly.
How to file a VAT return
Filing a VAT return involves:
-
Calculating your total VAT sales (output tax)
-
Calculating the VAT you’ve paid on business purchases (input tax)
-
Subtracting input tax from output tax — the difference is what you pay HMRC (or reclaim)
-
Submitting via MTD-compatible software before the deadline
-
Paying any VAT owed by the deadline
HMRC VAT penalties — what you need to know
HMRC introduced a new penalty points system in January 2023. Here’s how it works:
-
Each late return earns a penalty point
-
Reach the threshold (4 points for quarterly filers) and you receive a £200 penalty
-
Every subsequent late return adds another £200
-
Late payment charges also apply — starting at 2% of the outstanding VAT
The simplest way to avoid VAT penalties? Have a professional bookkeeper handle your VAT returns. Julia ensures every return is filed accurately and on time, every quarter.
