Output and Input VAT – Value Added Tax on Purchase in UK

If you are searching for the most accurate definition of Output and Input VAT, then you have finally come to the right place. In this article, we will discuss the easiest definition of output and input VAT for the convenience of our readers along with few basic examples.

What is Output VAT?

Output VAT or also known as Output Value Added Tax is the amount of value-added tax that you directly charge on the sales of goods and services only if you are a registered VAT user. Moreover; the output VAT must be charged from both businesses and consumers directly. We hope this small definition of Output VAT was enough for you to make you understand everything regarding Output VAT.

What is Input VAT?

Input VAT or also known as Input Value Added Tax is a specific amount of tax that is added to the price of goods and services that you pay for. However; you just need to make sure that all those particular goods and services are eligible for VAT otherwise Input VAT cannot be applied to Non-VAT registered goods and services.

How Input VAT & Output VAT is calculated?

The method to calculate the exact amount of Input VAT and Output VAT is very simple and easy. Here are few basic examples of it that will help you to understand everything clearly.

Input VAT Example:

If a shop or any business is registered in VAT and the total purchase of goods is around 62,000 Pounds at a 20% VAT Rate during a VAT period, then its VAT Inputs value will be 12,400 Pounds.

Output VAT Example:

If a shop or business sells some particular goods for up to 150,000 pounds exclusive VAT in case of non-VAT registration, then the Output VAT will be 30,000 Pounds.

However; in the case of VAT settlement, you have to deduct the output VAT from input VAT and the resulting amount must be reported to the local tax office.

Click Here: VAT Threshold

Frequently Asked Questions – Output and Input VAT

What is Output Tax in GST?

The Output Tax in GST is the total amount of sales tax that is charged at the current rate of sales tax on some specific taxable sales that are made during any month. Moreover; the General Sales Tax Output and Value Added Tax Output are completely different terms with different meanings.

How Do You Calculate Output Tax?

If you want to calculate the Output tax, then you have to multiply all the taxable sales with the tax rate. So the mathematical formula to calculate the output tax is
Output Tax= Sales Value * Tax Rate

What is meant By Input Tax and Output Tax?

Input Tax: Input Tax is the total amount that is paid by any registered person on the purchases and imports.
Output Tax: The Output Tax is the total amount of sales tax that is charged on the taxable sales at the current sales tax rate during the month.

Is Output Tax a Debit or Credit?

The Output Tax is considered as a liability, therefore it’s considered credit.

Is Input Tax an asset?

The Input Tax is considered an asset because it reduces the VAT or GST liability.

Final Words – What is VAT Input and Output?

We hope this detailed article on Output VAT and Input VAT has covered the most important areas of this topic. We have also tried our utmost to discuss this topic with some examples to make you understand everything in a better way. If you have any questions in your mind, don’t hesitate to comment below.

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