Cash Accounting VAT Scheme Calculator UK 2026

Find out whether cash accounting VAT benefits your business cashflow compared to standard invoice accounting — especially if your customers are slow to pay.

Cash Accounting VAT Cashflow Calculator

Annual Taxable Turnover (£, excluding VAT)

Average Debtor Days (how long customers take to pay you, in days)

Average Creditor Days (how long you take to pay suppliers, in days)

Quarterly Net VAT Liability (£) (output VAT minus input VAT, typically)

Cash Accounting vs Invoice Accounting for VAT

Most VAT-registered businesses use invoice accounting (also called accruals accounting) as the default. Under this method, you account for VAT on your sales invoices as soon as you issue them — regardless of when your customer actually pays. Similarly, you reclaim input VAT as soon as you receive a supplier invoice.

Under cash accounting, you only account for VAT when cash actually changes hands. This can be advantageous if you have long payment terms or slow-paying customers, as you defer paying output VAT to HMRC until you've actually received the money.

The scheme is open to businesses with taxable turnover up to £1.35 million per year (you must leave if turnover exceeds £1.6 million).

Frequently Asked Questions

What is the cash accounting VAT scheme?

The cash accounting VAT scheme allows eligible businesses to account for VAT based on when payments are actually received from customers (and made to suppliers), rather than the invoice date. This means you only pay output VAT to HMRC once your customer has paid you, and you only reclaim input VAT once you have paid your suppliers — helping cashflow if you have slow-paying customers.

Who qualifies for cash accounting VAT?

You can join the cash accounting scheme if your estimated taxable turnover for the next 12 months is no more than £1.35 million (excluding VAT). You must also be up to date with your VAT returns and payments and not have been convicted of a VAT offence or issued a surcharge in the past 12 months.

What is the difference between cash accounting and invoice accounting for VAT?

Under invoice accounting (the default), VAT is accounted for on the invoice date regardless of when payment is received. Under cash accounting, VAT is accounted for when payment is actually made or received. For businesses with slow-paying customers, cash accounting defers output VAT, improving cashflow. However, it also delays input VAT recovery until you pay suppliers.

How do I join the cash accounting VAT scheme?

You can join the cash accounting scheme at the start of any VAT accounting period — there is no need to notify HMRC in advance. Simply start using the scheme and keep appropriate records. However, if you are already in the annual accounting scheme, you cannot also use cash accounting (you must leave annual accounting first).

How do I leave the cash accounting VAT scheme?

You must leave cash accounting if your taxable turnover exceeds £1.6 million in a 12-month period. You may also voluntarily leave at the end of any VAT period. When leaving, you must account for all outstanding VAT on invoices not yet paid — this can create a one-off VAT liability in your transition period.