Input VAT vs. output VAT — what’s the difference?

Summary

Quaderno’s guide (created October 2025, updated May 2026) explains the two building blocks of every VAT return. Input VAT (also called input tax or “VAT receivable”) is the tax a business pays when it purchases goods or services; output VAT is the tax it charges customers on its own sales. The difference between the two determines whether the business owes money to the tax authority at period-end, or can reclaim a refund. [quaderno.io]
Using a worked example—a business buying £1,000 of web hosting at 20% incurs £200 of input VAT—the guide stresses that input VAT is only reclaimable where the buyer is VAT-registered, holds a valid VAT invoice, and uses the purchase for taxable business activity. Output VAT must be charged once turnover exceeds the registration threshold, collected on the government’s behalf, and remitted in full; it does not add to the seller’s income. [quaderno.io], [fonoa.com]
The core mechanic is net settlement: output VAT minus reclaimable input VAT for the same period equals what the business pays (or reclaims). The guide warns that getting the deduction wrong—invalid supplier VAT number, missing invoice, or non-business use—means the input VAT disappears even on a legitimate transaction, and that incorrect returns risk penalties. It closes by recommending automation to reduce manual errors and keep filings audit-ready. [quaderno.io], [taxually.com]

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