Get VAT wise!

Did you know there are three ways to pay your VAT?

Choose the right method and you'll save money, save time on your paperwork and improve your cashflow in one easy move.

VAT is normally calculated quarterly by working out the VAT on the sales less VAT on the purchases. The payment is due by the end of the following month for the VAT quarter.

For smaller businesses, there are also three different schemes in which a company can pay for their VAT, the scheme that you choose will depend on the turnover and how long customers take to pay you.

Flat Rate Scheme

The VAT is worked out by applying a flat rate percentage to the total turnover (including VAT). The percentage depends on the type of business but is between 2% and 13.5%.

The advantage of this scheme is that there is less time involved: the VAT is calculated on the total turnover. It is simpler than doing VAT the normal way as you do not need to record the VAT on small purchases.

If you company is just registering for VAT a further 1% can be discounted for the first year only.

Cash Accounting Scheme

With this scheme, the company only pays their VAT when they have been paid by their customers: If you are paid late by a customer you do not need to pay the VAT until the debt has been paid.

If for any reason the account is not paid then you do not have to pay the VAT at all.

Annual Accounting Scheme

The company pay either by monthly or quarterly instalments and complete a single VAT return at the year end with any balance due.

The advantages of this scheme is that you know how much VAT you are going to pay either each month or quarter: you have no big VAT bills and less time will be spent on filling in VAT returns.

Related Links

.

Bookkeeping Basics
Bookkeeping basics is at the centre of all your business accounting reports. Without bookkeeping you will not be able to keep control of your company finances.

Starting a Small Business
If you're starting a new business and you want some advice about where to start, our section on Starting a New Business will tell you everything you need to know in order to get your business on its feet and running!

Small Business Advice
If you are already running a business and want help with day-to-day issues like accounts, bookkeeping, invoicing, chasing up late-paying customers, cash flow, insurance, health and safety or even marketing - you'll find our running a business section invaluable.

Free Guides
We've written a number of free accounting guides and free business guides to help you get on top of your accounts.

Lots More Free Stuff
If you want free help with marketing, or want business cards and promotional materials without spending a fortune, where do you go? There are hundreds of places to go to get all this and more. Here's our guide on what is available and where to get it.