From 8 September 2025 you can no longer correct VAT return errors on form VAT652. You either adjust your next VAT return, or you tell HMRC about the error separately — online, or in writing.
How to amend a VAT return, and when you must tell HMRC separately
You can usually adjust your next VAT return if the net value of errors found on previous returns is:
- £10,000 or less, or
- between £10,000 and £50,000, and no more than 1% of the box 6 figure (net outputs / the total value of sales) on the VAT return for the period in which you discover the errors.
Work out the net value by adding up the extra VAT due to HMRC and subtracting the extra VAT due to you. You must not include deliberate errors in that netting calculation. You can correct errors on returns from the preceding four years where these limits apply. When you adjust the next return, add the net amount to box 1 if VAT is due to HMRC, or to box 4 if VAT is due to you, and keep a record of the error in your VAT account.
You must tell HMRC separately (online or in writing) if:
- the net error is over £50,000, or
- the net error is over £10,000 and exceeds 1% of that box 6 figure, or
- the error was deliberate.
You may also choose to tell HMRC separately about an error of any size. Method 1 (an adjustment on the next return) is not, by itself, a disclosure for penalty purposes. If the error was careless, telling HMRC separately can still matter for the penalty. If you took reasonable care and you can use method 1, GOV.UK says you do not need to make a separate disclosure.
The software notes below still apply to adjustments on the next return. Ignore any instruction in the older text to use form VAT652; use HMRC’s online error-correction notification, or write to HMRC, instead.
2. Making Changes to the Next VAT Return Using Bookkeeping Software
When using bookkeeping software like Xero or QuickBooks Online (QBO), correcting errors on your VAT return can be straightforward and automated. These platforms typically allow you to make adjustments directly within the software, which will automatically reflect in your next VAT return.
Process Overview:
- Identify the Error: Once you identify an error in a past VAT return, you can correct it by making an adjustment in the corresponding transaction within the software. For instance, if you under-reported VAT in a previous period, you would locate the relevant invoice or expense entry and adjust the VAT amount.
- Automatic Adjustment: After the correction is made, the software will automatically adjust the VAT amount in the next return. This is typically done by amending the VAT return figures that are pulled directly from your ledger accounts, ensuring that your VAT liability is accurately updated.
- Review and Submit: Before submitting your next VAT return, it's important to review the adjustments made to ensure they are correctly accounted for. Both Xero and QBO provide a detailed summary of VAT transactions, including adjustments, allowing you to verify that the error correction is properly reflected.
- Reporting to HMRC: If the correction meets the criteria for adjustments without needing to separately notify HMRC (i.e., within the £10,000 or £50,000 thresholds), the software will include this in the next submission without further action needed. However, if a separate disclosure is required, you must tell HMRC separately online or in writing, outside of the software.
Using bookkeeping software simplifies the process, reduces manual errors, and ensures that your VAT returns remain compliant with HMRC’s regulations. This seamless integration helps businesses manage their VAT obligations more efficiently, particularly for minor adjustments that do not require additional reporting.
4. How Long Until Changes Are Reflected Online?
Once you’ve submitted the correction, the time it takes for the changes to reflect online can vary:
- Adjustments Made in the Following VAT Return: If you’ve corrected an error in the next VAT return, the changes will typically be reflected in your VAT account after that return is processed. This usually takes a few days after submission, depending on HMRC’s processing times.
- Separate disclosure to HMRC: If you’ve told HMRC about the error separately (online or in writing), HMRC will review the disclosure, which could take several weeks. The correction will be reflected in your VAT account once HMRC has processed the notification and made the necessary adjustments.
5. Should I Pay Additional VAT Immediately After Correction or Wait?
If your correction results in additional VAT being due, it is prudent to pay the amount as soon as possible rather than waiting for the correction to appear online. Paying promptly reduces the risk of incurring interest and late payment penalties. Ensure that when you make the payment, you clearly state that it relates to an error correction to avoid any confusion.
6. What Kind of Penalties Can I Expect?
Penalties for errors on VAT returns can vary depending on the nature of the mistake:
- Careless Errors: If HMRC deems the error to be due to carelessness, penalties typically range from 0% to 30% of the VAT underpaid. This percentage may be reduced if you voluntarily disclose the error and cooperate fully with HMRC.
- Deliberate Errors: For deliberate errors, penalties can be much harsher, ranging from 20% to 70% of the VAT underpaid. In cases of deliberate concealment, penalties can increase to 100% of the underpaid VAT.
It’s important to correct errors as soon as they are discovered to mitigate potential penalties. If you can demonstrate that the error was a genuine mistake and take steps to correct it promptly, HMRC may reduce the penalty.
6. Will I Be Investigated?
Correcting an error does not automatically trigger an investigation by HMRC. However, if the error is significant or suggests a pattern of non-compliance, HMRC may choose to investigate further. Voluntary disclosure of errors is often viewed favorably by HMRC and can reduce the likelihood of an investigation.
If you have a history of compliant behavior and the error is minor, it’s less likely that you will face an investigation. Nonetheless, it's crucial to maintain accurate records and demonstrate due diligence in your VAT reporting to avoid complications.
Conclusion
Correcting errors in VAT returns is a critical responsibility for businesses. By understanding when you can make adjustments in your next VAT return and when you need to follow a separate process, you can manage your VAT obligations effectively. Timely payment of any additional VAT due, awareness of potential penalties, and proactive correction of errors can all help in maintaining good standing with HMRC and avoiding more severe consequences. In any doubt you should talk to the VAT team at HMRC or your accountant.
