What is a VAT return and how do you submit one?

What is a VAT return and how do you submit one?

A VAT return is the form that tells HMRC how much VAT you have charged your customers and how much you have paid other businesses. The difference between those two figures is either what you owe HMRC or what HMRC owes you.

Most businesses submit one every three months. You cannot type the figures straight into HMRC’s website any more. Knowing how to submit a VAT return now means using software that connects to HMRC, because Making Tax Digital applies to every VAT registered business.

The rest of this article covers what goes on the return, when it is due, what software you need and what it costs if you are late. The late payment penalties in particular changed during 2025, and a lot of guidance still online quotes the old figures.

Who has to file a VAT return?

Anyone registered for VAT. Registration becomes compulsory once your taxable turnover passes £90,000, measured either over the previous 12 months or when you expect to pass it within the next 30 days. You can also register voluntarily below that figure.

If you went over on a rolling 12 month basis, you must register within 30 days of the end of the month in which you crossed the threshold. Your registration then takes effect from the first day of the second month after you went over, which is earlier than most people expect.

Source: VAT registration: when to register (GOV.UK)

Once registered, you file a return for every period whether or not there is anything to declare. A quiet quarter with no sales still needs a return, and a nil return filed late attracts the same penalty as any other.

What goes on a VAT return?

Less than people imagine. HMRC asks for your total sales and purchases, the amount of VAT you owe, the amount you can reclaim, and the amount you are owed by HMRC where you are reclaiming on business expenses.

Source: What to include in a VAT Return (GOV.UK)

The figures themselves come out of your bookkeeping. That is where the real work sits, because a return is only as good as the records behind it. If your sales and purchases are recorded properly through the quarter, the return is close to a formality. If they are not, no software will rescue it.

When is your VAT return due?

The deadline is usually one calendar month and seven days after the end of your accounting period. The same date applies to the payment, not just the return.

So a quarter ending 31 March has a deadline of 7 May. Both the return and the money need to be with HMRC by then. The deadline does not move for weekends or bank holidays, so if it falls on a Sunday you need to have paid before it.

Source: Send a VAT Return (GOV.UK)

That last point catches people out with slower payment methods. The rule is about when the money reaches HMRC, not when you press send.

Do you have to use Making Tax Digital software?

Yes. All VAT registered businesses are now covered by Making Tax Digital for VAT, and HMRC no longer asks you to sign up separately. If you are registered, you are in it.

Source: Making Tax Digital for VAT (GOV.UK)

In practice that means one of two things. Either you use a compatible software package that keeps your digital records and submits the return, or you keep using something HMRC’s systems cannot talk to, such as a spreadsheet, and add bridging software to connect it. Bridging software is simply a link between your existing records and HMRC.

Source: Find software that’s compatible with Making Tax Digital for VAT (GOV.UK)

A spreadsheet on its own is not enough. That is the single point most people get wrong, and it is worth checking before a deadline rather than on the day.

What happens if you file your VAT return late?

Late filing works on penalty points rather than an immediate fine. Each late return earns you one point, and nothing is charged until you hit the threshold for your filing frequency.

The thresholds are two points if you file annually, four if you file quarterly, and five if you file monthly. Reach your threshold and you get a £200 penalty, then another £200 for every late return while you remain at it.

Source: Penalty points and penalties if you submit your VAT Return late (GOV.UK)

The design is deliberate. One slip costs you nothing in cash, but a pattern of late filing does. It also means a business that quietly runs at three points for a year is one missed deadline away from a charge without ever having paid a penny.

What happens if you pay your VAT late?

This is where the figures changed, and where older articles will mislead you. Paying late is treated separately from filing late, and it now costs considerably more than it used to.

Nothing is charged for the first 15 days. From day 16 a first penalty applies at 3% of the VAT outstanding at day 15. From day 31 that first penalty is recalculated as 3% of what was outstanding at day 15 plus 3% of what was still outstanding at day 30, and a second penalty starts running daily at a rate of 10% a year on the balance until it is paid.

Source: How late payment penalties work if you pay VAT late (GOV.UK)

The previous rates were 2% and 4% a year. The increase applies to VAT periods starting on or after 1 April 2025 where the payment fell due after 31 May 2025, so any guide still quoting 2% and 4% is out of date.

Source: CH193140: first and second late payment penalty (HMRC internal manual)

The practical consequence is that the 15 day window matters more than it did. If you cannot pay in full, contacting HMRC before the penalties start is a better position than waiting to see what happens.

A worked example

The following is illustrative only and is not a prediction of anyone’s position.

Tom runs a small joinery company with a VAT quarter ending 30 June. His return and payment are due by 7 August. He owes £6,000.

He files on time but pays on 10 September, which is 34 days late. Because he is past day 30, his first penalty is worked out at 3% of the balance outstanding at day 15 plus 3% of the balance still outstanding at day 30. A second penalty also starts accruing daily from day 31 at 10% a year until he pays. Had he paid on 20 August, within 15 days, there would have been no late payment penalty at all.

His filing record is clean, so he picks up no penalty points. The two systems run independently, which is why a business can be punctual with returns and still face a bill.

Frequently asked questions

Do I still need to file a VAT return if I had no sales?

Yes. A VAT registered business must submit a return for every period even where there is no VAT to pay or reclaim. A nil return is still a return, and it still counts towards penalty points if it is late.

Can I still use a spreadsheet for my VAT records?

You can keep using one, but not on its own. It has to be connected to HMRC through bridging software, because HMRC’s systems cannot accept figures typed in by hand from a spreadsheet.

How often do I have to file?

Most businesses file every three months. Monthly and annual filing exist as alternatives, and your penalty point threshold changes with your frequency, so a monthly filer gets five points before a charge and an annual filer only two.

What if I cannot pay my VAT bill?

Contact HMRC rather than letting the deadline pass in silence. Penalties and interest build from fixed points in the calendar, so the earlier the conversation happens, the smaller the problem usually is.

Does registering for VAT mean charging all my customers more?

It means adding VAT to your standard rated sales, which affects consumers more than VAT registered customers, since those customers can generally reclaim it. Whether that changes your pricing depends on who you sell to, and it is worth modelling before you cross the threshold rather than after.

How WV4 Accountants can help

VAT is mechanical once it is set up properly, and expensive when it is not. We handle the parts that cause trouble.

1. Checking whether you need to register, and when registration actually takes effect
2. Setting up compatible software or bridging software so your records meet Making Tax Digital requirements
3. Preparing and submitting your returns, so knowing how to submit a VAT return stops being your problem
4. Reviewing which VAT scheme suits your business
5. Helping you approach HMRC early if a payment is going to be difficult

If your next VAT quarter is coming up and you are not confident the figures are right, we are happy to look at it with you. There is no charge for an initial conversation.

Important note: This article provides general information. Tax treatment depends on individual circumstances. Current HMRC guidance should be checked before action is taken.