Top 5 Common VAT Mistakes Small Businesses Make — And How to Avoid Them

VAT can be one of the most confusing parts of running a business — and it’s easy to make mistakes if you're not careful. Here are five common pitfalls we see small businesses make, and how you can avoid them.

1. Missing the VAT Registration Threshold

Many businesses don't realise they’ve crossed the VAT threshold (£90,000 as of 2024/25) until it's too late. If you're close to that turnover, monitor it monthly and seek advice before you're legally required to register.

Avoid it by: Tracking your 12-month rolling turnover and speaking to an accountant as you near the limit.

2. Not Charging VAT Correctly

Charging the wrong rate — or forgetting to charge it at all — can lead to underpayments and penalties. It’s also easy to miss if some of your products or services are zero-rated or exempt.

Avoid it by: Double-checking VAT rates for everything you sell and reviewing your invoicing system regularly.

3. Claiming VAT on Ineligible Purchases

Not everything you buy is eligible for VAT reclaim. Entertainment, some vehicles, and personal use items are common traps.

Avoid it by: Keeping receipts and knowing what HMRC considers a valid business expense.

4. Poor Record Keeping

HMRC requires accurate digital records under Making Tax Digital. Spreadsheets with missing data or manual errors can land you in trouble.

Avoid it by: Using accounting software that complies with MTD — and keeping on top of your entries.

5. Missing VAT Return Deadlines

VAT returns are usually due quarterly, and missing them can lead to interest and surcharges.

Avoid it by: Setting calendar reminders and outsourcing if it’s too time-consuming to manage in-house.

Need Help with Your VAT?

At Efkaristo, we make VAT simple. Whether you’re unsure about registration or need help filing your next return, we’re here to help you stay compliant and stress-free.