How to Complete Your First VAT Return

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1. Understand What a VAT Return Is

A VAT return is a report you submit to HMRC that shows:

• How much VAT you charged on sales (output tax)
• How much VAT you paid on purchases (input tax)
• The difference between the two, which determines whether you pay HMRC or receive a refund

Your first VAT return will cover the period starting from your VAT registration date until the end of your assigned VAT period (usually quarterly).

2. Prepare Your Records

Before filing your first VAT return, gather:

• Sales invoices showing VAT charged
• Purchase invoices showing VAT paid
• Records of any goods or services purchased before registration that are eligible for reclaim
• Bank statements and bookkeeping records

Accurate record-keeping is essential for correct reporting.

3. Calculate Output and Input VAT

• Output VAT: Total VAT you have charged customers during the VAT period
• Input VAT: Total VAT you have paid on eligible business purchases
  The amount to pay (or reclaim) is calculated as: Output VAT – Input VAT

Example:

• Output VAT = £5,000
• Input VAT = £3,000
• VAT due = £2,000 to HMRC

4. Submit Your First VAT Return

Most businesses must use Making Tax Digital (MTD) for VAT software to submit returns online.
Steps:

1. Log into your HMRC account or use MTD-compatible software.
2. Enter the figures for sales, purchases, and VAT calculations.
3. Submit your return by the deadline.
4. Make payment if VAT is due (or wait for a refund if reclaiming).

5. Deadlines for Your First VAT Return

• Usually due one month and 7 days after the end of your VAT period
• Payment must also reach HMRC by this date to avoid penalties

Your online VAT account will show your exact first return dates.

6. Tips to Avoid Mistakes

• Double-check calculations for accuracy
• Ensure only eligible business expenses are claimed
• Keep digital records to stay compliant with MTD rules
• Submit early to avoid last-minute issues

Frequently Asked Questions

Can I reclaim VAT on purchases made before registration?
Yes, you can usually reclaim VAT on goods purchased up to 4 years before registration (if still in use) and services up to 6 months prior.

What happens if I miss the first VAT return deadline?
You may receive a surcharge or penalty. Submit on time to avoid extra costs.

Do I need an accountant to file my VAT return?
No, but using one can help if you are unsure about calculations or MTD compliance.

Conclusion

Completing your first VAT return can seem daunting, but with accurate records and MTD-compliant software, the process is straightforward. File on time, double-check your numbers, and you’ll stay compliant while managing your VAT efficiently.