How to get your accounts in order for VAT filing

If your accounts are in order, filing your VAT return to HMRC from FreeAgent is as easy as checking the figures and clicking a button. But if you haven’t managed to stay on top of your accounts, this simple task can quickly turn into something a bit more arduous.

To save you from stress, here are five tips for getting your accounts in order for VAT filing with minimal effort:

1. Check your accounting dates

You need to enter three important dates when you set up your FreeAgent account:

Your company start date

For sole traders, this is when you began trading. For limited companies, this is the company’s incorporation date.

Your first accounting year end date

Most sole traders and partnerships have an accounting year end date of 5th April to coincide with the end of the tax year (but this isn’t always the case, so if you’re not sure you should check with HMRC). For limited companies, the year end date is usually a year from the month of the company start date - so if your company start date was 5th March 2018, your first accounting year end date was 31st March 2019.

Your FreeAgent start date

This is the date you started keeping your books in FreeAgent.

It’s important to get all these dates right so FreeAgent can calculate your VAT bill accurately. Follow our guide to setting your business’s accounting dates in FreeAgent to make sure you don’t run into trouble.

2. Check your initial VAT settings

All new businesses in FreeAgent are marked as ‘not registered for VAT’ by default, so if your business is registered for VAT you need to enter details such as:

  • the date your business registered for VAT
  • your business’s VAT registration number
  • your first VAT period end date
  • whether your business is on any special schemes, such as the VAT Flat Rate Scheme

You can find all this information on the VAT certificate that HMRC sent you when you registered for VAT. You can check whether the VAT settings are correct for your business in FreeAgent by following our initial VAT settings guide.

3. Backfill your historical transaction data

If the transactions in your FreeAgent account don’t accurately reflect the money that came in and out of your bank account, the calculations for your VAT return won’t add up. FreeAgent’s powerful automation features - like our Open Banking bank feeds, which automatically backfill your account with historical bank transactions - can help you sort this out with minimal hassle.

Your previous VAT returns in FreeAgent should also match the returns that HMRC have on record. Check out this article on how to check historical VAT returns to find out more. If your VAT returns don’t match, you will need to correct any errors before you file your next return.

4. Make sure you’ve registered for Making Tax Digital

HMRC’s new VAT filing system, Making Tax Digital (MTD) for VAT, is here! If your business is registered for VAT and has VATable sales above the threshold (currently £85,000), you’re now mandated to file VAT returns through MTD. If your sales are below the threshold, you can choose to sign up to MTD for VAT.

You'll need to sign up for MTD for VAT in order to use FreeAgent to submit your VAT returns. If you haven’t yet signed up yet, bear in mind that signing up for MTD for VAT with HMRC can take up to a week.

Once you’ve signed up for MTD for VAT, there are still a few things you need to do in order to ensure that you’re ready to file when your VAT return deadline comes around. Our Knowledge Base has more details on how to prepare for MTD for VAT in FreeAgent.

5. Stay on top of your accounts

The easiest way to make sure your accounts are in order is to keep them up to date throughout the year. FreeAgent has all the features you need to manage your day-to-day accounting with minimal hassle. With the FreeAgent mobile app you can stay on top of expenses, invoices and bank transactions on the go so your accounts will be ready and waiting for you to perform a final check when your VAT return is due.

Take a closer look at how FreeAgent can automatically generate and submit your VAT return to HMRC.

Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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