How to Submit A VAT Return When You’re Self-Employed

We know VAT can be a tricky topic. After all, the UK has some unusually complicated VAT rules. Did you know that loo roll is currently charged at 20% - the standard rate - but caviar is VAT-free? Or that normal crisps are subject to VAT, but tortilla chips aren’t?

With so many complexities to get your head around, it’s no wonder you might feel a bit confused when it comes to submitting your VAT return. 

But we’re here to break it all down for you. In this guide, we'll walk you through how to submit a VAT return when you're self-employed, covering everything from VAT registration to filing deadlines and how to claim a VAT refund.

Let’s start with the basics:

What is VAT?

VAT (Value Added Tax) is a consumption tax added to most products and services sold by VAT-registered businesses in the UK. 

What is a VAT return?

Once a business is VAT registered, they are required to charge customers VAT on all their sales, which is called output tax. Although this is ultimately paid by customers at the point of sale, the business is still responsible for collecting the VAT and paying it on to HMRC through their VAT return.

VAT registered businesses can also reclaim VAT on their business expenses through their VAT returns, which is called input tax. 

When you let HMRC know how much VAT you charged in one accounting period - and how much you were charged when paying business-related expenses - HMRC will subtract the total VAT you've paid on business expenses (input tax) from the total VAT you've charged on sales (output tax) during that time.

This will determine whether you’re due a VAT refund for that period (and if you are, the difference will normally be refunded within ten days), or whether you need to pay HMRC a VAT liability. 

Registering for VAT as a self-employed person

The first thing you’ll need to do if you’re planning to submit a VAT return is register for VAT, as you can’t submit a VAT return as a sole trader or self-employed person if you’re not VAT registered. 

You can read our step-by-step guide to registering for VAT to find out how to get started.

Is VAT registration mandatory?

As a self-employed individual, you must register for VAT with HMRC if your taxable turnover exceeds £85,000 (the current VAT registration threshold for 2024) within a rolling twelve-month period. 

If your turnover is less than £85,000, VAT registration is optional, but you can still choose to register voluntarily to benefit from VAT reclaims on business expenses.

How to register for VAT

You can register for VAT online through HMRC's website using their online VAT registration service. 

The registration process requires you to provide information about your business, including your turnover, business activities and your contact details. 

HMRC will then send you confirmation that you’re all set up and issue you a VAT registration number.

How to submit a VAT return once you’re registered

Once you’ve successfully registered and have your VAT registration number, you’ll be able to submit your VAT return. 

You can complete and submit your VAT return online using accounting software that’s compatible with HMRC's Making Tax Digital (MTD) service, or by appointing and working with a professional accountant or tax adviser.

To make this process as straightforward as possible, you’ll need to have kept accurate VAT records throughout every one of your accounting periods. Your records should include details of all sales and purchases, including VAT invoices, receipts and records of VAT collected and paid, as these are the types of questions you’ll need to answer when filling out your VAT return.

How often do I need to submit a VAT return?

VAT return deadlines vary depending on your VAT accounting period, which may be quarterly, annually, or monthly. It’s always worth consulting a professional tax adviser to find out how often you need to submit a VAT return as a self-employed person. 

Either way, you must fill out and submit your VAT return within one month and one week of the end of the relevant period. 

It's essential to familiarise yourself with your VAT return deadlines and ensure you submit on time to avoid penalties or late fees. 

Seeking professional advice when submitting a VAT return

Especially if it’s your first time submitting a VAT return, we’d highly recommend consulting a professional accountant or tax adviser to help you submit your VAT return. 

A professional will help take all the stress out of the process for you; helping you understand how to fill out a VAT return correctly as a sole trader or self-employed person, talking you through your legal responsibilities as a VAT registered business, and answering any questions you might have about your specific tax situation. 

If you’re looking for some help submitting your VAT return or registering for VAT as a sole trader, our new service for sole traders, CrunchONE, might be the perfect fit. CrunchONE combines award-winning self-employed accounting software with support from in-house accredited accountants to help you make smarter finance decisions and never worry about tax again.

How to claim your VAT refund

Reclaiming input tax

As a self-employed individual, you can reclaim VAT on business expenses incurred for the purpose of your business activities, provided they are directly related to your business and not used for private or non-business purposes. 

Examples of expenses eligible for input tax reclaims include business supplies, equipment purchases, and professional services.

The VAT refund process

To claim VAT refunds on business expenses, make sure you keep hold of all VAT invoices or receipts as evidence of your input tax claims. 

Include these claims in your VAT return, deducting them from your VAT liability. HMRC will verify your claims and process any refunds you’re due in around ten days.

Final thoughts

Submitting VAT returns as a self-employed person might seem complicated, but with the right help and resources, it can be a fairly straightforward process. 

By keeping thorough VAT records, calculating your tax liabilities and refunds correctly and remembering to submit your VAT returns on time, you can fulfil your VAT obligations with confidence. And if you ever feel lost, don't hesitate to reach out for some expert advice!