The Most Common VAT Mistakes UK Businesses Make (And How to Avoid Them)

VAT doesn’t have to be complicated, but many UK businesses still fall into the same traps time and time again. The good news? With a little awareness (and the right support), you can steer clear of costly errors.

At VATease, we’ve helped businesses of all sizes fix VAT problems — often ones that could have been avoided with a bit of friendly guidance. Here are the most common VAT mistakes we see, and how you can sidestep them.

1. Missing the VAT registration deadline

One of the biggest slip-ups is failing to register for VAT on time.

• You must register if your taxable turnover goes above £90,000 in any rolling 12-month period (not just at year-end).

• HMRC doesn’t take late registration lightly — you could face penalties and be backdated for VAT you didn’t charge.

How to avoid it:Track your turnover monthly. If you’re close to the threshold, get advice early so you don’t end up registering in a rush.

2. Charging the wrong VAT rate

Not all sales are charged at the standard 20% rate. Some are reduced (5%), some are zero-rated, and others are exempt. Getting this wrong can mean underpaying HMRC or overcharging your customers.

How to avoid it:Check HMRC’s list of VAT rates for your industry — or ask us. We’ll help make sure you’re charging the right rate every time.

3. Claiming VAT on non-eligible expenses

It’s tempting to reclaim VAT on all your business costs, but not everything is allowed.

Common pitfalls include:

• Entertainment expenses (like client lunches).

• Cars used for both business and personal use.

• Costs without a valid VAT invoice.

How to avoid it:Keep clear records and only claim VAT where it’s permitted. A quick sense-check with a VAT advisor can save you from future headaches.

4. Poor record-keeping

Missing invoices, muddled receipts, and messy spreadsheets are a recipe for VAT errors. Without clear records, your VAT returns can be wrong — and if HMRC inspects, you’ll be in trouble.

How to avoid it:Use accounting software that’s Making Tax Digital (MTD) compliant and store invoices electronically. Consistency is key.

5. Missing VAT return deadlines

VAT returns are usually due every quarter. Missing deadlines can result in late fees and interest charges — not to mention extra stress.

How to avoid it:Set reminders, use software that auto-alerts you, or let an advisor handle it for you. That way, you’ll never miss a deadline.

6. Forgetting about reverse charge VAT (for overseas transactions)

If you buy services from overseas suppliers, you may need to account for VAT under the reverse charge rules. This is easily overlooked but can cause problems if ignored.

How to avoid it: Understand when the reverse charge applies (common with digital services or contractors abroad). A quick check with your advisor will keep you compliant.

7. Not seeking help soon enough

Many businesses only reach out when they’ve already made a mistake. By then, penalties and stress have piled up.

How to avoid it:Get advice early. A quick conversation with VATease can prevent problems before they start.

Final thoughts: VAT doesn’t have to trip you up

Mistakes happen — but most VAT problems can be avoided with good habits, clear records, and a bit of expert advice.

At VATease, we make VAT simple and stress-free. Whether you’re registering for the first time, filing quarterly returns, or just want peace of mind, we’re here to help.

👉 Need a friendly chat about VAT? Get in touch with us today — no jargon, just straightforward advice.