How to Pay VAT in the UK?

If you are wondering how to pay Vat in the UK, then you’ve come to the right place. In this article, we’ll go over the rates of VAT, exemptions, and how to register. We’ll also cover the payment options you have available. So, what are you waiting for? Get started on your VAT journey today! Here are the steps:



VAT Rates

In the last few years, the UK has implemented new laws to lower the VAT rate for many businesses. These laws allow for reduced rates for many goods and services, including electricity and gas. The new rules will apply between 15 July 2020 and 12 January 2021. Businesses in certain sectors, such as the tourism and hospitality industry, can apply for a reduced VAT rate of 5%. However, they must check the details with their accountant and make sure they meet the necessary criteria before passing on lower prices to customers.


  • Rates are not the Same for Each Type of Business

When it comes to VAT rates in the UK, it is important to understand exactly what these laws mean. The customary rate of VAT is 17.5%, but the rates can change at any time. The rates are not the same for each type of business, and they can change over time. Some goods and services are exempt from VAT, such as medical services, postage stamps, and certain types of property transactions. Some services, such as legal fees and vehicle MoT tests, are not subject to VAT.


  • Businesses that do not wish to Register for VAT

Businesses that do not wish to register for VAT should consider the consequences of Brexit and how it will affect their business. In the U.K., B2C ecommerce sellers will have to register for VAT six months after July 1, 2021. Moreover, facilitating marketplaces will be considered suppliers in third-party import sales. In France, this means that marketplace facilitators will become deemed suppliers in all transactions. Further, businesses that sell goods and services that are exempt from VAT must register for VAT in order to sell them in the country.


  • Businesses in the Hospitality and Tourism Industry 

Businesses in the hospitality and tourism industry can expect temporary VAT cuts that will save them money. For example, the government has recently reduced the standard VAT rate for the hospitality and hotel sector by 5%. This change will apply to those businesses that sell food and drink, and also to tourist attractions, such as theme parks. Certain other businesses will also benefit from the cut. These changes will protect jobs and ensure the economy continues to grow. Once these changes take effect, it is unlikely that any businesses will see a big increase in business.




Many goods and services are exempt from VAT, and some of these activities are considered charitable. Moreover, charities are allowed to advertise free of VAT, which includes advertising in conventional media such as TV, cinema, billboards, the sides of vehicles, and newspapers. Generally, zero-rated supplies are not taxable, but there are some exceptions to this rule. The following are some of these activities:


  • Charitable Body

The University of Strathclyde is exempt from VAT if it is a charitable body. As a registered charity, the University of Strathclyde can place adverts for courses that fit in with its charitable object. Although this advertising is exempt from VAT, the University must make the supply to a third party. This exemption applies to advertisements for a number of different purposes, including recruitment of staff.


  • Partially Exempt from VAT

Some businesses are partially exempt from VAT, but they can still register for VAT and claim it back on taxable purchases. Often, small businesses and new businesses are unsure of whether they need to register for VAT, and making a wrong decision could lead to costly problems. Regardless of the business’ size, it is critical to understand how VAT works. Once you have a general idea of the rules, you can choose an appropriate VAT advisory service.


  • Not Every Small Business Qualifies for VAT Exemption

Not every small business qualifies for VAT exemption, but if your turnover is below a certain threshold, you can take advantage of VAT exemptions in other EU countries. These thresholds are important to remember when putting together business forecasts. There are some exceptions, however, so it’s always better to research your options before you decide on a VAT regime. And if you have the right business model, you can be free from paying VAT on your products and services.



Registering for VAT

Before you can begin registering for VAT in the UK, you must know how much it will cost. Most businesses have to add at least 20% to their invoices for VAT. The HMRC provides guidance on how to calculate this tax. The VAT period is also flexible, allowing you to adjust it to match your accounts reference date or year-end. There are a number of different reasons for changing this period. To learn more, read on.


  • Benefits of Registering for VAT 

Among the benefits of registering for VAT is that it will free up your cash flow by allowing you to claim back the VAT you paid on your purchases. Alternatively, it will give you an official image with customers and potential business partners. Not registering for VAT can hurt your reputation, as prospective clients may perceive your business as a small, unprofessional operation that won’t be able to meet their orders. Alternatively, if you’re a new business, registering for VAT is a good way to gain customers and build your credibility.


  • Do it Yourself or with the Help of an Accountant

Once you have decided to register for VAT in the UK, you can either do it yourself or enlist the help of an accountant. Once you have completed the registration process, you’ll receive a VAT registration certificate within thirty days. Be sure to check the information and documents carefully to ensure they are correct. You’ll need to provide additional documents in order to complete your registration, and the certificate will inform you when you should submit your first VAT payment. After you’ve completed the process, you’ll need to submit VAT returns to HMRC every quarter.


  • You can Claim Back the VAT

Once you’ve registered for VAT in the UK, you can claim back the VAT you pay on eligible purchases. But remember that you can’t claim back VAT on non-business activities that are VAT-exempt. Once you’ve registered, you can claim back pre-VAT costs through your first VAT return. For this, you must maintain records and valid VAT invoices. You’ll also need to complete the VAT return to report your VAT payments and collection.



Payment Options

If you don’t have a physical bank account, you can set up an electronic standing order to pay your VAT bill. This payment method takes about three working days to reach HMRC. It’s a great way to ensure that you pay your VAT bill on time without having to deal with the hassle of sending a cheque or using an online payment method. Alternatively, you can pay your VAT bill via your online banking account.


  • VAT Registration is Mandatory

VAT registration is mandatory for all businesses in the UK. In addition, if your business sells to customers from other EU countries, you’ll have to register for VAT in these countries as well. Using your business’s VAT registration number will ensure that you get the correct VAT rate every time. If you’re not sure which currency to use, you can choose the ‘origin-based’ taxation method on your invoices.


  • Another Option for Paying Your VAT Bill 

Another option for paying your VAT bill is to set up a Direct Debit. The Making Tax Digital for VAT portal makes it easy to make VAT payments, allowing you to focus on what matters most: your business and your clients. The portal’s features make it simple to manage your accounts and track VAT owed. There’s also a variety of payment methods available, including debit card, credit card, and bank transfer.


  • Regardless of the Payment Method

Regardless of the payment method you choose, the most important thing to remember is that you must be realistic about how much you can pay. If you don’t pay on time, you could have your payment plan terminated, and penalties will be incurred. You will also have a difficult time setting up a new payment plan if you don’t make payments on time. If you fail to make your payments on time, HMRC will not approve your payment plan.




When it comes to backdating VAT in the UK, there are some specific rules. However, most countries allow retrospective registration. Slovenia does not. This means that you have to report previous sales and invoices and not claim them back. Ireland, on the other hand, allows you to backdate registration for four years, but only if you have a high turnover. The general rule is that you cannot backdate registration if you have no VAT receipts to show that you were VAT registered.


  • Time Period for Backdating VAT in the UK 

The time period for backdating VAT in the UK varies by business type and purpose. You can only backdate if you have been VAT registered for at least six months or four years before you sold your goods or services. If you were VAT registered before the period, you should still have the goods on hand or used in the production of other goods. In addition, your costs should not be a direct cost component of any sales made before your registration date.


  • Backdating VAT in the UK can be a Fiddly Process 

Although backdating VAT in the UK can be a fiddly process for small businesses, it is important to ensure that you keep accurate records. Clear record keeping ensures that you pay VAT. It also demonstrates your business’s integrity. Small business owners are particularly grateful for tax reliefs and allowances, but the process of claiming them can be a headache. This article outlines 21 common mistakes small businesses make when filing their VAT returns.


  • You can Backdate VAT up to Four Years before Your Registration

In the UK, you can backdate VAT up to four years before your registration. This is allowed by law, but you must be careful not to apply the backdate to your first sales. HMRC limits backdating to four years because it is difficult to calculate the tax for VAT that was paid more than four years earlier. It’s always best to seek the advice of an accountant before applying for backdating VAT. That way, you can avoid any problems later.

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