Key facts
- Output VAT is the VAT you charge on your sales.
- Input VAT is the VAT you pay on your business purchases.
- Your VAT Return calculates: output VAT − input VAT = net VAT due.
- If input VAT exceeds output VAT, HMRC refunds the difference.
The Difference Between Output VAT and Input VAT
Output VAT is the VAT you charge to your customers when you sell goods or services. You collect this VAT on behalf of HMRC.[1]
For example, if you sell a product for £100 plus 20% VAT, you charge £120. The £20 is output VAT.
What Is Input VAT?
Input VAT is the VAT you pay to your suppliers on business purchases. You can usually reclaim this from HMRC on your VAT Return.[1]
For example, if you buy office supplies for £50 plus £10 VAT, the £10 is input VAT that you can reclaim.
The VAT Calculation
Output VAT (what you charged) − Input VAT (what you paid) = Net VAT
Positive result → you owe HMRC. Negative result → HMRC owes you.
Where They Appear on Your VAT Return
| Box | What It Covers | Type |
|---|---|---|
| Box 1 | VAT due on sales and other outputs | Output VAT |
| Box 2 | VAT due on acquisitions from EU (NI only) | Output VAT |
| Box 3 | Total VAT due (Box 1 + Box 2) | Output VAT total |
| Box 4 | VAT reclaimed on purchases and other inputs | Input VAT |
| Box 5 | Net VAT to pay or reclaim (Box 3 − Box 4) | Net result |
What Input VAT Can You Reclaim?
You can reclaim input VAT on purchases that are for your business and where you hold a valid VAT invoice.[3]
- Stock and raw materials
- Office supplies and equipment
- Professional services (accountant, solicitor)
- Business travel and accommodation
- Fuel and vehicle costs (business proportion)
What You Cannot Reclaim
- Business entertainment (except for overseas customers)
- Purchases for personal use
- Items not supported by a valid VAT invoice
- VAT on purchases relating to exempt supplies (unless de minimis)[3]
Frequently Asked Questions
What is the difference between output VAT and input VAT?
Output VAT is the VAT you charge on your sales to customers. Input VAT is the VAT you pay on your business purchases. Your VAT Return calculates the difference between the two.
Can I reclaim input VAT on all business purchases?
You can reclaim input VAT on most business purchases provided you hold a valid VAT invoice. However, you cannot reclaim VAT on business entertainment, personal items, or purchases relating to exempt supplies.
What happens if my input VAT is higher than my output VAT?
If your input VAT exceeds your output VAT, you have a negative net VAT figure and HMRC will refund the difference to you.
Which boxes on the VAT Return show output and input VAT?
Box 1 shows output VAT due on sales, Box 4 shows input VAT reclaimed on purchases, and Box 5 shows the net amount you owe or are owed by HMRC.
Further Reading
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Sources
- VAT guide (VAT Notice 700) — GOV.UK
- How to fill in and submit your VAT Return — GOV.UK
- Reclaim VAT — GOV.UK