When it comes to tax, you may be required to file a few different types of returns. Two of the most common are the tax return and the VAT return. Though they may have similar names, some key differences exist between these two types of returns.
What is a Tax Return?
A tax return is a self-assessment that taxpayers must complete to file their annual tax return to HMRC. This is required for any self-employed individual, a sole trader or a partner in a partnership.
It is also required for anyone who is a company director or a member of a limited liability partnership. You may also be required to submit a tax return if you have income from other sources, such as property rental, savings and investments.
If you are required to submit a tax return, you will need to complete a Self-Assessment tax return, which can be completed online.
What is a VAT Return?
VAT (Value Added Tax) is a tax charged on goods and services sold or provided in the UK. You must file a quarterly VAT return if your business is registered for VAT. This is a record of the VAT you have charged, paid and are owed.
VAT returns are submitted online to HMRC via your Government Gateway account. Your VAT return will include the following information:
- Total sales and other outputs for the quarter
- Total VAT you have charged for the quarter
- Total purchases and other inputs for the quarter (excluding VAT)
- Total VAT you have paid for the quarter
- Total amount of VAT you owe or are owed for the quarter
The due date for your VAT return will depend on the type of VAT scheme you are registered for.
You will also need to pay any VAT you owe to HMRC by the due date. If you have paid too much VAT, you will be refunded the amount you overpaid.
How to Tell the Difference Between a Tax Return and a Vat Return
A VAT return is a document that businesses use to report the value-added tax collected from customers and paid to suppliers. A tax return is a document that businesses and individuals use to report their income and taxes paid to the government.
Self-assessment tax returns are submitted to HMRC once a year, and VAT returns are currently made quarterly.
Making Tax Digital (MTD): What It Means for Your Business
The MTD initiative mandates that all VAT-registered businesses in the UK maintain a digital tax record. This digital record must update automatically and store all company data in one place. The initiative is designed to help businesses by increasing transparency and reducing errors associated with paper tax filing.
This initiative will give businesses access to a digital tax account with HMRC. They will be able to submit tax information quarterly, instead of annually. This will make HMRC more technologically advanced and streamlined.
The Bottomline
A tax return and a VAT return are both important documents for businesses, but they serve different purposes. Knowing the difference between the two and the introduction of MTD is crucial today to ensure that all your taxes and vat are sorted out.
Whether you need help with your tax or vat returns, an accounting service is extremely helpful for your business. Accountants 247 provides cost-effective, high-value solutions to meet your needs regardless of the size of your business. Get in touch with us.
