VAT bill spreader
A VAT bill feels sudden because it arrives once a quarter, but the money was collected from customers gradually across the whole period. This calculator works out how much to set aside each month so the bill is already covered when it falls due, a month and 7 days after the VAT quarter ends. On the default example, a £9,000 quarterly VAT bill means putting away £3,000 a month.
Calculator
Set aside per month
£3,000.00
£9,000.00 spread over 3 months.
Worked example: change the figures to your own. If your VAT liability varies, base this on your average over the last few quarters rather than a single unusually high or low one.
| Component | Value |
|---|---|
| Expected quarterly VAT bill | £9,000.00 |
| Months in the quarter | 3 |
| Set aside per month | £3,000.00 |
Source: FundBiz VAT bill spreader model
Illustrative. HMRC's standard VAT return and payment deadline is 1 month and 7 days after the end of the VAT period.
View as plain-text Markdown
### Worked example: £9,000 quarterly VAT bill | Component | Value | | --- | --- | | Expected quarterly VAT bill | £9,000.00 | | Months in the quarter | 3 | | Set aside per month | £3,000.00 | Source: FundBiz VAT bill spreader model Illustrative. HMRC's standard VAT return and payment deadline is 1 month and 7 days after the end of the VAT period.
Why this catches businesses out
VAT collected from customers sits in the business bank account and looks like available cash, because it's cash, right up until it has to be paid over. If it's spent on day-to-day costs during the quarter rather than ring-fenced, the bill still falls due in full a month and 7 days after the VAT period ends, whether or not the money is still there.
“Businesses that consistently pay VAT on time almost always have one thing in common: the VAT money moves to a separate account the moment it is collected, not at the end of the quarter when someone remembers to check. A calculation on paper does not stop the cash being spent. A standing order that moves the money out of the operating account weekly or monthly does. If you have been caught out more than once, the fix is not a better forecast, it is removing the temptation.”
If you're already behind
Contact HMRC before the deadline, not after. See our Time to Pay negotiation guide and the wider VAT finance options if a Time to Pay arrangement or a VAT loan makes more sense than catching up from cash flow alone. Setting aside monthly going forward, even alongside clearing an existing arrear, avoids the same shock repeating next quarter.
FAQs
Why do businesses get caught out by VAT?
VAT collected from customers sits in the business bank account and looks like available cash until the quarterly bill falls due, a month and 7 days after the VAT period ends. If it has been spent on day-to-day costs rather than set aside, the bill arrives as a shock even though the money was, technically, always there to be collected.
How much should I set aside each month?
Divide your expected quarterly VAT bill by 3 and set that aside monthly, ideally into a separate account you don't touch for anything else. If your VAT liability varies by quarter, base it on your average VAT liability over the last few quarters, or on the net VAT rate you actually pay against turnover.
What if I am already behind on VAT?
Contact HMRC before the deadline, not after. A realistic Time to Pay arrangement, agreed in advance, is treated very differently to arrears HMRC has to chase. See our Time to Pay negotiation guide for how to work out a realistic offer before you call.
Is a VAT loan the same as spreading the payment myself?
No. Setting money aside monthly means you pay HMRC in full and on time with no interest or fees, funded entirely from your own cash. A VAT loan or Time to Pay arrangement means paying the finance cost or HMRC interest on top, because the saving discipline didn't happen in advance. Setting aside monthly is the cheaper option whenever it's genuinely possible.
Founder & Managing Director, Muswell Rose, FundBiz
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind FundBiz. His background runs through commercial finance, mortgages and fintech, including as managing director of an invoice finance business. He oversees FundBiz's guides and lender reviews.
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