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Set up and manage VAT in QuickBooks

by Intuit•36• Updated 3 weeks ago

Learn how to set up, customise, and manage your VAT settings in QuickBooks Online. QuickBooks can automatically calculate VAT on your invoices and receipts for easy and accurate filings. It lets you know when your tax payment is due, so you can file on time and avoid extra fees or penalties.

This article is for customers who use QuickBooks Online.

Before you begin

To set up and manage VAT in QuickBooks Online, make sure you have the following information ready:

  • Your 9-digit VAT registration number
  • Your VAT accounting scheme (Standard or Flat Rate)
  • Your VAT filing frequency (monthly, quarterly, or annually)
  • Your accounting method (cash or accrual)
Note: If you’re VAT-registered, you must keep digital records and submit your VAT returns through HMRC’s Making Tax Digital (MTD) system. QuickBooks Online supports MTD, but you’ll need to connect your account to HMRC before filing returns.

Set up VAT in QuickBooks

  1. Go to Taxes and select VAT (Take me there).
  2. Select Set up VAT.
  3. Select the month you need to start calculating VAT from.
  4. Select your filing frequency for VAT. This is how often you will submit VAT returns to HMRC.
  5. Choose your VAT accounting scheme.
    • Select Standard (also known as accrual) if you record income and expenses when you send the invoice or receive the bill, regardless if the invoice or bill was paid or not.
    • Select Cash if you record income and expenses at the time you receive the payment or pay the bill.
  6. Enter your 9-digit VAT registration number.
  7. If applicable, select the Flat Rate Scheme (FRS) checkbox and enter the percentage and tax registration date.
  8. Select Next, and then OK.

Once set up, you can track VAT from customers, assign VAT categories to products and services, check how much tax you owe, and submit returns to HMRC.

Tip! See our complete guide on VAT codes in QuickBooks Online.

From April 2022 all VAT-registered businesses must use Making Tax Digital (MTD) to submit their returns to HMRC. Learn how to set up MTD for VAT in QuickBooks here.

According to the HMRC VAT guide, if you calculate VAT at line level or invoice level you must not round the VAT figure down, but you can round up (or down) each VAT calculation.

  • Round down if the VAT on any transaction comes to less than 0.5 of one penny.
  • Round up if the VAT comes to 0.5 of one penny or more.

Read the HMRC trader's records manual for more information.


Update VAT settings

If your business details change, you can update your VAT settings.

  1. Go to Taxes.
  2. Next to Edit VAT, select the ▼dropdown arrow.
  3. Select Edit settings to make changes to the following:
    • VAT period
    • Filing frequency
    • Accounting method
    • 9-digit VAT registration number
    • Other VAT options like FRS rate percentage and tax registration date
    • Turn Making Tax Digital (MTD) for VAT on/off
  4. Select Save.

Add or edit VAT rates

You can add another tax rate for VAT, like local tax, that isn't already included in QuickBooks.

  1. Go to Taxes.
  2. Select Add Tax.
  3. Select Tax rate.
  4. Give the new tax rate a name and add a few details in the description.
  5. Select the tax agency it applies to and the rate percentage.
  6. Select Save.
  1. Go to Taxes and select VAT (Take me there).
  2. Select Edit VAT and then Edit Rates.
  3. Select Edit next to the tax rate you want to make changes to.
  4. Make the necessary changes and select Save.

Show or hide tax rates

If you can't find a specific tax rate in QuickBooks, it might be because it's set to 'inactive' and hidden. Here's how you can easily activate tax codes or hide the ones you no longer need.

  1. Go to Taxes and select VAT (Take me there).
  2. Select Edit VAT and then Edit Rates.
  3. Select the gear icon above the Action column.
  4. Select Include inactive. This will show a list of all the codes that are currently hidden and switched off.
  5. Use the toggle feature against the code you want to switch on/off.

Add a group rate or custom tax agency

You have the flexibility to add a group rate, which lets you combine multiple taxes for easier application to transactions. All the taxes you include are calculated and charged simultaneously, but we track them separately for you.

Alternatively, you can create a custom tax agency and define a specific tax percentage for specific purposes. Keep in mind that you can not delete a tax agency once it has been created.

  1. Go to Taxes.
  2. Select Add Tax.
  3. Select the type of tax you want to add.
  4. Enter the details such as name, description, percentage rate and where it applies.
  5. Select Save.
  1. Go to Taxes.
  2. Select VAT.
  3. Select the ▼ dropdown arrow next to the current VAT agency. Or, select the arrow on either side of the Taxes dashboard.

Turn off VAT

If your business is no longer VAT-registered, you can’t delete VAT entirely from QuickBooks, but you can prevent it from being applied to new transactions. Historical VAT data will remain for reference and reporting.

Learn how to turn off VAT in QuickBooks Online.


What's next?

Once you've set up VAT in QuickBooks, learn how to:


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