How journal entries affect the VAT Return

Summary

How journal entries affect the VAT Return in Sage Accounting Start. This explains when journals update VAT Return boxes and how Flat Rate VAT works.

Description

You use journal entries to move values between ledger accounts. Journals don’t appear on the VAT Return by default.

You can include VAT on a journal if required. When you do, the journal can affect specific VAT Return boxes depending on the ledger account and entry type.

Resolution

Understand how journals update the VAT Return

When you include a journal on the VAT Return, Sage updates boxes based on the ledger account and if it's a debit or credit.

Ledger account	Default nominal code	Entry type	VAT Return impact
VAT on sales	2200	Credit	Increases Box 1
VAT on sales	2200	Debit	Decreases Box 1
VAT on purchases	2201	Credit	Decreases Box 4
VAT on purchases	2201	Debit	Increases Box 4
Income accounts	4000 to 4940	Credit	Increases Box 6
Income accounts	4000 to 4940	Debit	Decreases Box 6
Expenditure account	5000 to 9999	Credit	Decreases Box 7
Expenditure accounts	5000 to 9999	Debit	Increases Box 7
Any other ledger account	Any	Credit	Increases Box 6
Any other ledger account	Any	Debit	Increases Box 7

Understand journals on the Flat Rate VAT Scheme

If you use the Flat Rate VAT Scheme, journals don’t directly affect Box 1 or Box 4 on the VAT Return.

This is because Flat Rate VAT calculates VAT due as a percentage of turnover, not from individual VAT entries.

Record sales when using Flat Rate VAT

If you need to record a sale using a journal:

Use an income ledger account
This updates Box 6
Sage calculates VAT using your flat rate percentage and updates Box 1 automatically

Adjust Box 1 or Box 4 when using Flat Rate VAT

If you still need to amend Box 1 or Box 4:

Adjust the VAT Return manually, or
Create a purchase invoice and select Outside the scope of Flat Rate VAT to affect Box 4

Solution Properties

Solution ID: 222001000100556
Last Modified Date: Thu Oct 15 08:03:19 UTC 2026
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