The VAT Annual Accounting Scheme: one return,

2 min read

1Return per year

£1.35mJoin-up turnover limit

9 or 3Interim payments

How the scheme is structured

You make advance payments towards your VAT bill during the year — either nine monthly or three quarterly instalments based on your previous liability — then submit a single annual VAT return and settle any balance (or claim a refund). It converts an unpredictable quarterly bill into a smooth, budgetable outflow.

Who it suits

Eligible if VAT-taxable turnover is £1.35 million or less. It works best for stable, predictable businesses that want fewer filing deadlines and level cash flow. It is less suitable for fast-growing firms — instalments based on last year can undershoot a year of rapid growth, leaving a large balancing payment.

The cash-flow effect

Spreading VAT into instalments removes the quarterly cliff-edge, which makes forecasting far easier. The trade-off is that you only reconcile once a year, so errors or a mismatch between instalments and actual liability surface late — keep your bookkeeping current so there are no surprises at year end.

Combining schemes

Annual accounting can be combined with the Flat Rate or Cash Accounting basis, giving small businesses a genuinely low-admin VAT life. Weigh the simplicity against losing the quarterly reclaim rhythm if you make large, regular VATable purchases.

Where finance fits

Even level instalments can strain a slow month. A short working-capital facility covers the gap and is repaid as trading recovers.

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See indicative terms on business loans, or apply online in minutes.

See how to set money aside for VAT and tax.

Frequently asked questions

How many VAT returns do I file on annual accounting?

One a year, instead of four. You make interim payments during the year and reconcile with a single annual return, which reduces both admin and the number of filing deadlines to track.

What if my instalments are too low?

You settle the shortfall in a balancing payment with your annual return. For a growing business that can be a large sum, so review your instalment level if turnover is climbing faster than last year.

Can I combine annual accounting with the Flat Rate Scheme?

Yes. Many small businesses combine annual accounting with the Flat Rate Scheme for minimal admin — one return a year and a fixed percentage. Check both suit your cost profile first.