Written by the TaxTune Editorial Team · Reviewed by our qualified accountants · Updated for 2026
The quick answer The costliest VAT mistakes are reclaiming VAT with no valid invoice, applying the wrong rate, reclaiming blocked items such as entertaining and most cars, missing the Making Tax Digital digital link rule, and filing or paying late. Each is avoidable with a simple check before you submit.

The mistakes that cost the most

  1. Reclaiming without a valid VAT invoice. A bank statement is not enough. HMRC can disallow the claim, so keep proper invoices.
  2. Applying the wrong rate. Not everything is 20%. Some goods are reduced rated at 5% or zero rated, and getting it wrong cuts both ways.
  3. Reclaiming blocked VAT. Business entertaining and most cars cannot be reclaimed, however business related.
  4. Breaking the digital link rule. Copying figures by hand between spreadsheets can breach Making Tax Digital, which requires a digital trail.
  5. Filing or paying late. The points based penalty system adds up quickly, and interest runs on late payments.
  6. Getting the VAT period wrong. Filing for the wrong quarter throws the figures out.

Want your VAT checked before it goes wrong?

A single wrong rate or blocked claim can turn into penalties and interest. TaxTune prepares and reviews your returns, keeps you compliant, and makes sure every figure stands up.

See our VAT serviceAsk about your VAT

Let us take VAT off your plate

We keep your records digital and compliant, prepare and file every return correctly, and tell you exactly what to pay and when. Fixed monthly fee.

Get a VAT quoteTalk to a real accountant

Keep reading

Frequently asked questions

What is the most common VAT mistake?

Reclaiming VAT without a valid VAT invoice is among the most common. A bank statement alone is not enough evidence, and HMRC can disallow the claim on review.

Can I reclaim VAT on entertaining?

No. Business entertaining is blocked, so the VAT cannot be reclaimed, however closely it relates to winning or keeping business.

Can I reclaim VAT on a car?

Usually not for a car available for private use. VAT on commercial vehicles and genuine pool cars can often be reclaimed, but ordinary company cars are blocked.

What is the digital link rule?

Under Making Tax Digital, the figures on your VAT return must flow from digital records through digital links, not be retyped by hand between systems.

What is the penalty for a late VAT return?

HMRC uses a points based system. Each late return adds a point, and once you reach the threshold a £200 penalty applies, with more for further defaults. Late payment also attracts interest.