Cash Flow Forecast Template UK (with VAT)

UK businesses have a particular set of cash flow pressure points: quarterly VAT payments, monthly PAYE, corporation tax nine months after the year end, and self assessment payments on account for sole traders and partners. None of them are surprises, but they’re easy to leave out of a forecast, and they frequently cause the tightest months of the year. This guide explains how to build UK taxes into a cash flow forecast template.

Tax rules, rates and thresholds change. The dates below are the common patterns for small businesses; check the current position on GOV.UK or with your accountant for your circumstances.

VAT: the biggest cash flow trap

If you’re VAT-registered, the VAT you charge customers isn’t your income: you collect it on HMRC’s behalf and pay it over each quarter, after deducting VAT on your purchases. The cash sits in your bank for up to four months first, which makes the balance look healthier than it really is.

How to forecast VAT

1. Forecast receipts and payments including VAT, because that’s what actually moves through the bank.
2. Calculate VAT due each quarter: output VAT on sales minus input VAT on purchases.
3. Put the VAT payment in the month it’s due. For standard quarterly returns, the deadline for both the return and the payment is usually one month and seven days after the end of the VAT quarter. For a quarter ending 31 March, that’s 7 May.
4. Set it aside as you go. Many businesses move the VAT portion of every receipt into a separate account.

Example

A business with a quarter ending 31 March charges £60,000 of VAT on sales and pays £18,000 of VAT on purchases during the quarter.

If the forecast doesn’t include a £42,000 payment in May, it will overstate cash by £42,000 in every month from May onwards.

VAT schemes that affect cash flow

• Cash accounting scheme: you account for VAT when customers pay you and when you pay suppliers, rather than on invoice dates. This helps if customers pay slowly. There’s a turnover limit.
• Annual accounting scheme: you make advance payments through the year and one return at the end, which can smooth cash flow.
• Flat rate scheme: you pay a fixed percentage of turnover, which is simpler but not always cheaper.

Which scheme suits you depends on your business; your accountant can advise.

PAYE and National Insurance

If you employ staff, income tax and National Insurance deducted through payroll, plus employer’s National Insurance, are paid to HMRC. Most employers pay monthly, and electronic payments are usually due by the 22nd of the month after the tax month ends, which runs from the 6th to the 5th. Small employers with low monthly liabilities may be able to pay quarterly.

In the forecast, show net pay to staff on pay day, and the PAYE payment to HMRC around the 22nd of the following month. Pension contributions under auto-enrolment usually go to the pension provider on a similar monthly cycle.

Corporation tax (limited companies)

For most small companies, corporation tax is due nine months and one day after the end of the accounting period. A company with a 31 March year end usually pays by 1 January the following year. Larger companies pay in quarterly installments.

The gap means tax on a good year lands long after the profit was made, often in a quieter period. Put an estimate in the right month of your forecast as soon as you have a sense of the year’s profit.

Self assessment (sole traders and partners)

Sole traders and partners usually pay income tax through self assessment:

• 31 January: balancing payment for the previous tax year, plus the first payment on account for the current year
• 31 July: the second payment on account

Payments on account are generally each half of the previous year’s bill. After a strong year, the January payment can be a shock: the balance for last year plus half of it again in advance. Forecast both dates.

Business rates and other UK costs

• Business rates are often paid in ten monthly installments, usually April to January, unless you’ve arranged twelve.
• Employer pension contributions under auto-enrolment.
• Annual accounts and confirmation statement filing fees for companies.
• Insurance, often paid annually or monthly.

A UK tax calendar for your forecast

Using the template in the UK

Every template on this site works in pounds: set the currency on the Settings tab to GBP. The line names are generic enough for UK use: “Sales tax / VAT” and “Income tax installments” become your VAT and self assessment or corporation tax lines. Rename them if you prefer.

Making Tax Digital

VAT-registered businesses keep digital records and submit VAT returns through compatible software under Making Tax Digital. Your accounting software will usually calculate the VAT due for each quarter; use that figure in your forecast as soon as the quarter ends, and your estimate before then.

Common UK mistakes

• Treating VAT as income.
• Forgetting that the first corporation tax bill arrives nine months after the first year end, often after the company has spent the cash.
• Missing the January self assessment double payment.
• Putting PAYE in the same week as net pay, when it’s paid the following month.
• Forgetting business rates stop in February and March, then restart in April.
• Ignoring a change of VAT scheme or quarter dates, which moves every VAT payment in the forecast.
• Overlooking the VAT registration threshold. If turnover is approaching it, forecast the effect of charging VAT, including on prices and cash.

For the general method, see how to make a cash flow forecast, and for weekly detail around tax dates, the 13-week forecast guide.