Which input VAT can I reclaim in 2026?

From 2026 input VAT recovery broadens: VAT on your services, overheads, fixed assets and capital expenditure becomes recoverable, not just VAT on goods that physically enter what you sell. Input VAT attributable to exempt supplies is still lost.

How does VAT apportionment work?

When costs support both taxable and exempt supplies, the residual input VAT is split by the proportion of taxable turnover. Only the taxable share is recoverable. Zero-rated supplies count as taxable in that fraction; exempt supplies dilute it.

Can I reclaim VAT on exempt sales?

No. Exempt supplies are outside VAT, so the input VAT on the costs behind them cannot be reclaimed. This is the key difference from zero-rated supplies, where input VAT stays recoverable.

BusinessUpdated 15 January 2026

VAT return preparer

Work out your output VAT, exactly how much input VAT you can reclaim, and what you owe or are owed — with the zero-rated and exempt line drawn where it actually falls.

Tax year

Your sales and cost figures never leave your device. This calculator runs entirely in your browser. Nothing you type is sent to us, logged, or stored — there is no server to send it to.

Your business

Annual turnover

This decides whether you have a VAT obligation at all, so it comes first.

Fixed assets

Supplies you made this period

Line 1
Description
Amount (VAT-exclusive)
Classification
Charge VAT — and you can reclaim input VAT

Zero-rated and exempt look the same on an invoice — both charge nothing. Only one lets you keep the VAT on your costs. The schedules for both are further down this page.

Input VAT you were charged

Line 1
Description
Input VAT paid
What it relates to
Fully recoverable

VAT withheld at source

VAT your customers withheld and remitted for you

Start with your annual turnover on the left. It decides whether you have a VAT obligation at all — and below the threshold, there is no return to prepare.

Zero-rated and exempt are not two words for the same thing

On the invoice they are identical: you charge nothing either way. The difference is what happens to the VAT you were charged on the costs behind that supply. Zero-rated supplies are taxable supplies at 0% — the input VAT is recoverable, and the turnover counts in your apportionment fraction. Exempt supplies are outside VAT altogether — that input VAT is lost, and the turnover dilutes the fraction, so you also get less of your overheads back. Water is the classic trap: zero-rated as a basic item, but standard-rated when a restaurant, hotel or caterer sells it.

The other thing worth re-checking from 2026: input VAT on services, overheads, fixed assets and capital expenditure is now recoverable, and it was not before. If your VAT process was built before the reform it is probably still throwing that away. The VAT calculator handles a single figure if that is all you need.

Common questions

Which input VAT can I reclaim in 2026?: From 2026 input VAT recovery broadens: VAT on your services, overheads, fixed assets and capital expenditure becomes recoverable, not just VAT on goods that physically enter what you sell. Input VAT attributable to exempt supplies is still lost.
How does VAT apportionment work?: When costs support both taxable and exempt supplies, the residual input VAT is split by the proportion of taxable turnover. Only the taxable share is recoverable. Zero-rated supplies count as taxable in that fraction; exempt supplies dilute it.
Can I reclaim VAT on exempt sales?: No. Exempt supplies are outside VAT, so the input VAT on the costs behind them cannot be reclaimed. This is the key difference from zero-rated supplies, where input VAT stays recoverable.