VAT

How Do I Reclaim VAT?

10 January 2026

VAT

5 mins

Table of contents

Paying VAT on goods and services is all too familiar. The good news is that registering your business for VAT means you may be able to reclaim some of the VAT you pay. After all, it adds up!

We’ll look at who can reclaim VAT, how it works, and whether you need to be recording it.

Who can reclaim VAT?

Anyone that’s VAT-registered. So, who can register? It’s mandatory to register for VAT if you have a taxable turnover of £90,000 in a 12-month period, but you can also register voluntarily if you expect to hit the threshold and would like to prepare your business.

Some businesses register early because it helps them to be more tax efficient, allowing them to reclaim VAT on goods or services their business purchases. It’s worth noting though, if you do voluntarily register, you will need to charge VAT on your own goods and services, just like any other VAT-registered business.

Some businesses may be exempt from VAT, for example those which offer educational training, or businesses that deal in insurance. You cannot register for VAT if your business exclusively sells goods or services that are exempt – meaning you’re unable to reclaim it.

If your business sells both taxable and exempt goods, it’s known as ‘partly exempt’.

Is zero-rate VAT the same as VAT exempt?

In short, no. Being VAT exempt means no VAT charges whatsoever can be applied to the goods or services that you sell, whereas zero rated supplies are subject to VAT – but at a rate of 0%.

No need to include exempt goods and services on your VAT return
You do need to report anything zero-rated

You can register for VAT if you deal with zero-rated goods or services and reclaim any VAT back on purchases you make.

Check out our guide 'The Difference Between Zero VAT and VAT Exemption.'

What type of things can I reclaim VAT on?

You can reclaim VAT on anything used exclusively for your business. If you use something for both business and personal use, you can only claim the proportion which relates to the work usage.

For example

You have a home office which takes up 15% of the floor space in your house. You can claim 15% of the VAT on your utility bills.

There are some things you cannot reclaim VAT on, including:

Any goods or services used to make VAT-exempt supplies
Anything relating to personal use only
Any entertainment or hospitality costs for the people you do business with – for example, tickets to a football match for a client
Goods that were sold to you under the VAT second-hand margin schemes
Business assets transferred to you as a ‘going concern’

You can reclaim VAT back on goods and services you purchased before registering for VAT.

Reclaiming VAT on purchases you made before being VAT registered

You can reclaim VAT on goods purchased up to 4 years before you became VAT registered as long as the business still owns them. You can also claim back the VAT you paid on services up to 6 months before you registered.

How much is VAT?

It’s important to know there are different rates of VAT because once you’re VAT-registered, you’ll be responsible for charging the appropriate rate for your goods and services.

Rate

Standard

Reduced

Zero

Percentage

20%

The goods/services it applies to

This is the standard and most common rate which applies to the majority of goods and services.

The reduced rate applied to items such as children’s car seats and energy for domestic use.

Most foods, and children’s shoes, books and clothing are in this category.

How does charging and reclaiming VAT actually work?

As a VAT-registered business you’ll need to charge VAT on every eligible sale you make. In a way, you’re basically collecting VAT from your customers on behalf of HMRC. But at the same time, you’re also paying VAT to other registered businesses each time you buy something.

When you prepare your VAT submission it will show the total amount of VAT you collected on your sales, and the total amount of VAT you paid on your purchases over the same period of time.

Once you submit it, you’ll either reclaim the difference, or pay the difference between those two amounts.

You reclaim the difference if the amount of VAT you pay on your business purchases is more than the total amount you charge to customers
You’ll pay the difference if the amount of VAT your business has paid out is less than the total charged and collected from customers

See how your VAT bill works with our online calculator

How many times a year can I reclaim VAT?

Most businesses make VAT submissions quarterly, but this really depends on the VAT accounting scheme you use.

VAT Scheme

Standard VAT

Annual Accounting

Flat Rate Scheme (FRS)

What to Expect

Record VAT on any purchases and sales
Make a VAT submission at the end of each quarter (every 3 months)
Pay or reclaim the VAT due

Make one VAT submission to HMRC each year
You can make payments in either quarterly instalments, or monthly over the space of 9 months.
Any under or overpayments are then dealt with on your next annual return

Pay a flat rate based on a percentage of your annual turnover
The percentage you pay depends on your industry
You’ll still charge customers the correct amount of VAT, but you won’t be able to claim the VAT you pay out, apart from capital expenditure over £2,000
Instead, you can keep the difference between the VAT you collect, and the flat rate you need to pay

Do I need an accountant to help me claim VAT?

You can definitely submit a VAT return on your own, although an accountant can offer an extra helping hand through the process. For example, they can help you split the cost of utilities which you’d like to claim VAT for when you have a home office.

They can also help spot an invalid VAT invoice from a supplier (which you wouldn’t be able to use for your claim). So, if your VAT returns are a little tricky, we’d recommend chatting to an expert!

Should I keep VAT records?

Yes – HMRC requires you to keep VAT records to ensure you’re paying the correct amount of tax. You must keep VAT records digitally using compatible software (like Pandle – hi!).

VAT records must be stored for at least 6 years, but HMRC may require you to keep them for up to 10 years if you’re using the VAT One Stop Shop (OSS) scheme.

Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.

Rachael Anderson

A creative content writer specialising across business, finance and software topics. I have a love for all things writing, and creating engaging, easy to understand content that helps everyday people!

LinkedIn More posts by this author →