Input VAT
Input VAT is the VAT a business pays on its purchases and can usually reclaim. Output VAT is the VAT it charges customers. The difference between the two is what you pay to, or reclaim from, HMRC each period.
Also known as: input tax, output VAT
How it works
A VAT-registered business acts as a collector. You charge output VAT at 20% on standard-rated sales, pay input VAT on your costs, and settle the net figure with HMRC. Reduced-rated supplies are 5%, and some items are zero rated or exempt, which are not the same thing: zero rating allows input VAT recovery, exemption does not.
To reclaim input VAT you need a valid VAT invoice showing the supplier's VAT number, and the cost must be for business purposes. Where something is used partly privately, only the business proportion is recoverable.
Certain costs are blocked whatever the business reason. VAT on client entertaining is not recoverable, and neither is VAT on a car that is available for private use, which in practice means almost every company car. VAT on commercial vehicles, fuel with proper records, and business equipment is recoverable in the normal way.
Pre-registration input VAT can often be recovered: on goods still on hand bought up to four years before registration, and on services received in the six months beforehand. Businesses making both taxable and exempt supplies have to apply partial exemption, which restricts recovery.
Who this affects
- Every VAT-registered company reclaiming VAT on costs
- Newly registered businesses recovering pre-registration VAT
- Companies buying cars, where input VAT is normally blocked
- Businesses with exempt income applying partial exemption
Common mistakes
- Reclaiming from a receipt with no VAT number on it
- Recovering VAT on client entertaining
- Reclaiming the full amount on a cost used partly privately
- Treating exempt supplies as zero rated and over-recovering input VAT
Frequently asked questions
What is the difference between input and output VAT?
Input VAT is what you pay on purchases and can usually reclaim. Output VAT is what you charge customers and owe to HMRC.
What VAT cannot be reclaimed?
VAT on client entertaining, on cars available for private use, and on costs relating to exempt supplies or private consumption.
Can I reclaim VAT without an invoice?
Generally no. HMRC expects a valid VAT invoice, though simplified receipts are acceptable for small retail purchases.
Can I reclaim VAT from before I registered?
Usually yes: goods still held bought within four years before registration, and services received within six months before.
Related terms
Work this out
Related reading
Reviewed by Waqas Sagar ACA FCCA FMAAT · Last reviewed 13 September 2026 · Figures for 2026/27 · About our practice
Official sources
Not sure how this applies to your company? Get a fixed-fee quote.