Last updated: 14 October 2026
When should you record a business payment for your VAT records?
It depends on the VAT accounting method you use. Under standard accounting, VAT is recorded by the tax point, which is usually the invoice date, not the date the money moves. Under cash accounting, you record VAT on sales when the customer pays you and on purchases when you pay the supplier. Card payments count on the date of the transaction, and cheques count on the date they are received or sent.
Tax points under standard accounting
| Situation | Tax point |
| Goods | When they are delivered or made available (basic tax point) |
| Services | When the work is completed (basic tax point) |
| Invoice issued or payment received before the basic tax point | The earlier date (actual tax point) |
| Invoice issued within 14 days after the basic tax point | The invoice date |
| Continuous services | The earlier of invoice or payment |
Example
A builder finishes a job on 28 June and invoices on 5 July. The invoice is within 14 days, so the tax point is 5 July, and the VAT falls into the July–September return.
Recording payments under cash accounting
- Bank transfers: the date the money reaches your account
- Cheques: the date you receive the cheque, unless it bounces
- Card payments: the date of the transaction
- Direct debits: the date the payment is taken
- Part payments: VAT on the part paid
Purchases
Under standard accounting, reclaim VAT on the tax point of your supplier’s invoice, when you have it. Under cash accounting, you reclaim when you pay, even if the invoice is older.
Deposits
A deposit creates a tax point for the amount paid when you receive it, unless it is a refundable security deposit.
Why it matters for MTD
MTD software records VAT by date. If transactions are recorded on the wrong date, VAT moves into the wrong return, which can cause errors and penalties. Use your software’s VAT scheme setting so that it handles this automatically.
Tax point mistakes
A deposit creates a tax point when you receive it, and so does an invoice issued before the work is done. Many businesses only account for VAT when the job is finished, which puts VAT in the wrong period. Check the date of every invoice and payment against the quarter-end before submitting your return.
Continuous services
For ongoing services such as maintenance contracts, the tax point is usually the earlier of the date you issue an invoice or receive payment. Raising invoices on a regular schedule keeps VAT in the right quarter.
Frequently asked questions
I paid a supplier late. Does that change my VAT reclaim?
Under standard accounting, no, but if you haven’t paid within 6 months of the due date, you must repay the input VAT.
Can I switch between methods?
You can join cash accounting at the start of a period if your turnover is £1.35 million or less.
What date applies to PayPal or Stripe payments?
The date the payment is received in your account with the provider.
Does a pro forma invoice create a tax point?
No. A pro forma isn’t a VAT invoice.
Related: standard VAT accounting and VAT after deregistration.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT tax points. 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.
