VAT Annual Accounting – filing your return

by Aitch, posted in Value Added Tax

For eligible businesses, the VAT Annual Accounting Scheme can reduce paperwork, smooth cash flow and replace quarterly returns with a single annual submission.

The VAT Annual Accounting Scheme is open to most businesses with a taxable turnover of up to £1.35 million per year. Businesses using the scheme are required to submit one VAT return per year, rather than quarterly returns. This can significantly reduce the administrative time and cost associated with preparing and filing your VAT returns.

The scheme also allows businesses to make regular interim payments throughout the year, which can help with cash flow management. Interim VAT payments are made during the year based on the business’s estimated total VAT liability for the accounting period.

Interim payments can be made either monthly or quarterly and are followed by a final balancing payment submitted with the annual VAT return. The regular payments are usually based on the previous year’s VAT liability, which means they may be higher than necessary if turnover has fallen.

Where payments are made monthly, they are typically calculated as 10% of the estimated annual VAT bill and are due at the end of months 4 through 12 of the VAT accounting period. Where payments are made quarterly, they are usually calculated as 25% of the estimated VAT liability and are due at the end of months 4, 7 and 10.

The final balancing payment for the annual VAT return is due within two months of the end of the standard 12-month VAT accounting period. If VAT has been overpaid based on the estimated amounts, HMRC will refund the difference. Payments must be made electronically.

Source:HM Revenue & Customs | 01-01-2026
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Aitch
I'm Aitch, the Founder and CEO of CIGMA Accounting Ltd. As a Chartered Management Accountant and as a CIMA member, I've spent more than 16 years helping businesses, entrepreneurs, landlords, and individuals with tax planning, accounting, and HMRC compliance. As a chartered accountant in London, I'm passionate about making complex tax matters easier to understand and helping clients make confident financial decisions. Over the years, I've advised start-ups, SMEs, established companies, and high-net-worth individuals across a wide range of tax and accounting matters. My expertise includes Corporation Tax, Self-Assessment, Capital Gains Tax, Inheritance Tax planning, R&D tax relief, capital allowances, international tax, and resolving complex HMRC compliance issues. Whether clients need a business accountant, tax accountant, or strategic tax advisor, my focus is always on delivering practical advice that creates long-term value. One of my specialist areas is Making Tax Digital (MTD). I've worked extensively with businesses preparing HMRC's digital reporting requirements, helping them move to cloud accounting, improve financial processes, and adopt technology that makes compliance more efficient. I regularly speak at Making Tax Digital roadshows, industry events, and educational sessions in collaboration with Zoho Books, sharing practical insights into digital accounting, tax legislation, and the future of the profession. Many business owners looking for the best accounting firm in London are not simply searching for an accountant they're looking for trusted advice, responsive support, and long-term value. That's the approach I've taken in building CIGMA Accounting. My team and I work closely with businesses across London and the UK, providing accounting services, tax advisory, bookkeeping, payroll, VAT, company accounts, and strategic tax planning tailored to each client's goals. Through this website, I share practical guidance on UK taxation, Making Tax Digital, HMRC updates, Corporation Tax, Self-Assessment, and business finance. My aim is to provide reliable, straightforward information that helps business owners understand changing regulations, reduce compliance risks, and make informed financial decisions with confidence.
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