What is output VAT?
Output VAT is the VAT a VAT-registered business charges on its sales of taxable goods and services. When a business issues an invoice, it adds VAT at the applicable rate (20%, 5% or 0%) on top of the net price, collects that VAT from the customer, and accounts for it to HMRC on its VAT Return.
How is output VAT reported?
Each VAT-registered business must record the output VAT charged on every sale and report the total on its VAT Return, usually filed quarterly through Making Tax Digital-compatible software. The output VAT collected during the period is added to the return, and the business's input VAT (VAT paid on its own purchases) is deducted from it. If output VAT exceeds input VAT, the difference is paid to HMRC; if input VAT exceeds output VAT, the business can usually reclaim the difference.
Output VAT vs input VAT
Output VAT and input VAT are two sides of the same VAT Return. Output VAT is the VAT a business charges its customers on sales; input VAT is the VAT a business pays its own suppliers on purchases. A business does not simply keep the output VAT it collects, and it does not automatically get back all the input VAT it pays; instead, the two figures are netted off against each other each VAT period to work out what is owed to, or reclaimable from, HMRC.
Related terms: VAT, Input VAT, VAT Return, VAT Registration
VAT rules depend on the nature of transactions and individual circumstances. This glossary provides general information and is not personalised tax advice.