Knowledge Centre

VAT is a tax that you have to pay on many expenses and charge to your clients on top of your fee rate.

The current rate of VAT is set at 20%.

Example:

In your first month you charge a client £1,000 and you are VAT registered, you will have to add VAT on top of this at 20% this would be £200 making your total invoice £1,200.

During the month you have expenses that include £100 of VAT - say you bought a laptop for £600, £100 of this would be VAT.

You then need to pay £100 VAT over to HMRC (£200 VAT you charged to your client minus £100 VAT you paid on the laptop).

This is known as the VAT Standard Scheme.

VAT Responsibilities

There are three main VAT responsibilities you should understand:

1. You need to complete a VAT return every three months which is done online, and pay whatever VAT is due.

2. Each VAT return is due 1 month and 7 days after your quarter end, so if your quarter ends on October 31 you have to submit your return by 7 December.

3. When you submit your return you need to make payment for your VAT, this gives you a month and 7 days after your VAT quarter ends to make payment.


The 123 Way includes the preparation and submission of your VAT returns each quarter.