How do I estimate the VAT I will owe from the tax on my sales minus the tax on my purchases?

Why bother estimating?

The tax you collect from customers lands in your bank account along with the sale price, so your balance looks bigger than it really is. Then the payment date arrives and a large part of that balance turns out not to be yours. A monthly estimate lets you move the money into a separate account early instead of being caught short.

The steps

1. Add up the period's sales including tax from your store reports, say 115,000.
2. In the VAT calculator, choose extract and enter 115,000 with the rate that applies to your sales, here 15. Tax 15,000, net sales 100,000.
3. Add up your taxable purchase invoices including tax, say 46,000.
4. Extract them at the rate shown on those invoices, here 15. Tax 6,000, net purchases 40,000.
5. Subtract: 15,000 minus 6,000 is 9,000. That is roughly what you may need to set aside.

Where the real figure can differ

The calculator gives you correct arithmetic, but the actual return figure follows rules the tool does not know:

• Not every purchase qualifies for a tax deduction, and some expenses have special rules.
• Exempt or zero-rated sales are not treated like taxable ones.
• Returns, later discounts and invoice timing all move the number.
• If you have sales or purchases at different rates, work each group at its own rate.

So treat the result as a planning figure, and leave the final numbers to your accountant or the tax authority's rules.

Make it a monthly habit

Rather than working out a whole quarter in one go, do it monthly. Log purchases and expenses as they happen in the Expense summary generator so the month's total is ready, run the two extractions in a couple of minutes, and move the difference into a savings account. That way the money is there when payment is due.