Tax

What is Input VAT?

Input VAT is the VAT you pay on business purchases. You can usually reclaim this from HMRC on your VAT return.

Current Rate (2025/26)

20% standard rate (usually)

Example

Buy £500 of office supplies including £83.33 VAT. The £83.33 is input VAT you can reclaim.

Key Dates

Reclaim on your VAT return for the period you received the invoice

How Input VAT Works in Practice

Input VAT is the Value Added Tax you pay when purchasing goods and services for your business. As a VAT-registered business, you can reclaim most input VAT from HMRC through your VAT return. The mechanism is straightforward: you deduct your input VAT (Box 4 on the VAT return) from your output VAT (Box 1), and only pay the difference to HMRC. If your input VAT exceeds your output VAT (for example, if you made a large purchase or your sales are zero-rated), HMRC will refund the difference.

To reclaim input VAT, you must hold a valid VAT invoice from the supplier. For purchases under £250, a simplified invoice (showing the supplier's VAT number, date, description, and VAT-inclusive total) is sufficient. For larger purchases, you need a full VAT invoice showing the supplier's name and address, VAT number, invoice date and number, your name and address, a description of goods or services, the quantity, the unit price excluding VAT, the VAT rate, the VAT amount, and the total including VAT.

Not all input VAT is reclaimable. HMRC specifically blocks recovery on certain items: business entertainment (unless for overseas customers), the purchase of a car (unless used solely for business, which is rare for directors), and non-business use. If you use something partly for business and partly for personal purposes, you can only reclaim the business proportion. For example, if your mobile phone is used 70% for business, you can reclaim 70% of the VAT on the bill.

If your business makes both taxable and exempt supplies, you are 'partly exempt' and must use a partial exemption method to calculate how much input VAT you can recover. The standard method apportions input VAT based on the ratio of taxable to total supplies, but special methods can be agreed with HMRC if the standard method produces an unfair result.

Step by Step

When you receive a purchase invoice that includes VAT, you record it in your accounting software with the correct VAT amount. At the end of each VAT period, your software totals all the input VAT from your purchase invoices and enters the figure in Box 4 of your VAT return. This is then deducted from your output VAT (Box 1) to arrive at the net amount due or reclaimable.

The timing of when you can reclaim input VAT depends on your accounting basis. Under the standard (accruals) basis, you reclaim VAT in the period you receive the VAT invoice, regardless of when you pay. Under the cash accounting scheme, you reclaim VAT in the period you actually pay the supplier. The cash accounting scheme can help cash flow if you have long payment terms with suppliers.

For capital items over £50,000 (or £250,000 for land and buildings), the Capital Goods Scheme requires you to adjust your initial input VAT recovery over five years (ten years for land) if your use of the asset changes. For example, if you reclaim 100% of VAT on a building but later use part of it for exempt purposes, you must repay some of the VAT.

Practical Tips

Always request a full VAT invoice for purchases over £250 -- a receipt alone is not sufficient for VAT reclaim purposes
Photograph or scan all VAT invoices and store them digitally as well as physically -- if originals are lost, digital copies may be accepted by HMRC
Review your blocked input VAT regularly -- ensure you are not accidentally reclaiming VAT on entertainment or car purchases
If your business makes exempt supplies, review your partial exemption calculation annually to ensure it still reflects the actual use of your purchases

Common Mistakes to Avoid

Reclaiming VAT without holding a valid VAT invoice -- HMRC can disallow the claim and charge penalties if you cannot produce the invoice during an inspection
Claiming input VAT on blocked items like business entertainment or a car used partly for personal purposes
Reclaiming VAT on purchases from non-VAT-registered suppliers -- if the supplier is not VAT-registered, there is no VAT to reclaim, even if they charge higher prices
Not adjusting for partial exemption when the business makes both taxable and exempt supplies

Frequently Asked Questions

Can I reclaim VAT on petrol for my company car?

You can reclaim all the VAT on fuel if the car is used only for business. If there is any private use (including commuting), you must either only claim the business proportion or reclaim all the VAT and pay the fuel scale charge, which is a fixed amount based on the car's CO2 emissions.

What if I lose a VAT invoice?

Ask the supplier for a duplicate. Without a valid VAT invoice, you cannot reclaim the input VAT. HMRC may allow alternative evidence in exceptional circumstances, but this is at their discretion.

Can I reclaim VAT on purchases made before I was VAT-registered?

Yes, you can reclaim VAT on goods bought up to four years before registration (if still held at the date of registration) and services bought up to six months before registration. Keep the original invoices.

Is there a time limit for reclaiming input VAT?

You must claim input VAT within four years of the due date for the VAT return period in which the purchase was made. After four years, the right to reclaim is lost.

Source: HMRC VAT Input Tax Manual (VIT00000+): https://www.gov.uk/hmrc-internal-manuals/vat-input-tax and VAT Notice 700 Section 11: https://www.gov.uk/guidance/vat-guide-notice-700

Related Terms

Output VAT

Output VAT is the VAT you charge customers on your sales. You collect it from customers and pay it to HMRC.

VAT Return

A VAT return is a regular submission to HMRC showing the VAT you've charged (output VAT) and paid (input VAT), with the difference paid or reclaimed.

VAT (Value Added Tax)

VAT is a tax added to most goods and services sold in the UK. Businesses collect it from customers and pay it to HMRC, minus any VAT they've paid on business purchases.

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