2 min read
Definition
An input tax credit is the input VAT a registered business reclaims on its purchases, offset against the output VAT it owes, so it only pays HMRC the net difference.
In plain terms
For every VAT-registered business, the VAT on what you buy is (mostly) recoverable. You net it against the VAT you charged and pay HMRC only the balance — that recovery is the input tax credit.
Why it matters for your company
Reclaiming input tax correctly, with valid VAT invoices, directly reduces your VAT bill. Errors here — reclaiming without evidence, or on non-business or exempt costs — are a common cause of HMRC assessments.
Related reading
Input VAT
Input VAT is the VAT your business pays on its purchases, which you can usually reclaim, reducing the VAT…
Read →
Output VAT
Output VAT is the VAT your business adds to its sales and charges customers — money you collect for HMRC, not…
Read →VAT return
A VAT return is the report — usually quarterly — that tells HMRC how much VAT you charged, how much you paid,…
Read →Business credit score
A rating held on a limited company by credit reference agencies, condensing its payment record, filings and…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.