Last updated: 14 October 2026
What is standard VAT accounting?
Standard VAT accounting is the default way UK businesses account for VAT. You pay VAT to HMRC on your sales based on the invoice date (the tax point), whether or not your customer has paid. You reclaim VAT on purchases based on the invoice date of your supplier’s invoice, whether or not you have paid it. Returns are usually filed quarterly through Making Tax Digital software.
How it works
- Output VAT: due on sales invoices dated in the VAT period
- Input VAT: reclaimable on purchase invoices dated in the period
- Net amount: paid to HMRC, or repaid to you, one month and 7 days after the end of the period
Standard accounting vs cash accounting
| Feature | Standard accounting | Cash accounting |
| When you pay VAT on sales | Invoice date | When the customer pays |
| When you reclaim VAT on costs | Invoice date | When you pay the supplier |
| Turnover limit | None | Join if £1.35 million or less |
| Best for | Customers who pay promptly; businesses with large purchases on credit | Customers who pay late |
| Bad debts | Use bad debt relief after 6 months | Automatic relief, because no VAT is due until payment |
Example
In the quarter to 30 June, a business issues £60,000 plus £12,000 VAT of invoices, but only £40,000 plus £8,000 VAT is paid by 30 June. It buys £10,000 plus £2,000 VAT of supplies on 60-day terms, still unpaid at 30 June.
- Standard accounting: pay £12,000 − £2,000 = £10,000
- Cash accounting: pay £8,000 − £0 = £8,000, with the rest due in later periods as money moves
The total VAT is the same over time. The difference is cash flow, so model both for your own business.
Bad debt relief
Under standard accounting, if a customer doesn’t pay, you can reclaim the VAT you paid on the invoice once it is more than 6 months overdue and written off in your accounts.
Other schemes you can combine with
- Annual accounting: one return a year with interim payments, for turnover up to £1.35 million
- Flat rate scheme: a fixed percentage of turnover, for turnover up to £150,000
You can’t use cash accounting and the flat rate scheme together, but the flat rate scheme lets you work out turnover on a cash basis instead.
Who suits standard accounting?
- Businesses whose customers pay on time
- Businesses with large VAT costs before they get paid, for example stock or equipment
- Businesses that regularly receive VAT repayments, such as zero-rated sellers
Getting the scheme choice wrong
Businesses often join the flat rate scheme without checking the limited cost trader test, then pay 16.5% when they expected a lower rate. Others choose cash accounting but forget that they can’t reclaim VAT on purchases until they’ve paid for them. Review your scheme each year against your turnover and spending, and leave a scheme if it no longer saves money.
Frequently asked questions
Do I need to tell HMRC I’m using standard accounting?
No. It is the default.
Can I switch to cash accounting?
Yes, at the start of a VAT period, if you qualify. You don’t need HMRC’s permission.
What is a tax point?
See when to record payments for VAT.
Can I reclaim VAT on an unpaid supplier invoice?
Yes, under standard accounting. If you don’t pay within 6 months, you must repay it.
Related: VAT flat rate scheme for new businesses.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with choosing a VAT scheme. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
