In this post we’ll explain how to do a VAT return in Wave Accounting.

What is this free Wave Accounting?

Wave provide good free online accounting software. It’s paid for by small adverts at the side of the screen that you’ll hardly notice. Wave Accounting is a Canadian company who have built free accounting software mainly for Canada and the USA. But it can also be used in the UK and you can certainly work out what should go onto a VAT return in Wave. AS explained below, on anything other than the normal VAT scheme, you will need to adjust what is shown on the VAT return in Wave.

Accounting for VAT in Wave

VAT is a sales tax and that’s what it’s called in Wave Accounting. You’ll first need to set up your VAT rates by going to Settings (cog button), Sales Taxes, then Add a Sales Tax. See the image below for the settings you’ll need for the standard UK VAT rate at the time of publishing this post.

You may also need to set up other rates for your VAT return in Wave such as zero rate (0%) and the EC Reverse Charge rate which is explained below. Once you’ve set up the rates of VAT in Wave, you can then start adding or claiming VAT in Wave as follows:

Sales invoice and Bill: once you add a line to a sales invoice or bill in Wave, simply select the appropriate VAT rate. Wave will work out the VAT for you based on the percentage entered.

Transactions: add or select the income or expense in Transactions, then click on show details. The Taxes box will appear so you can select the appropriate VAT rate as shown below.

Running a Report for your VAT Return in Wave

The report you’ll need to do your VAT Return in Wave is the Sales Tax report. Just select the start and end dates for the period that your VAT return needs to cover then click on Update. Any transactions on which a VAT rate has been selected will appear in the report. The report is separated into a section for each VAT rate.

The summary report shows the totals and the audit report shows every transaction. The Payable columns are for income and sales (excluding VAT) and VAT on income and sales. The Receivable columns are for expenses and bills (excluding VAT) and VAT on expenses and bills. Then the difference between the two VAT amounts is the net VAT payable or receivable.

Normal Accruals VAT Return in Wave

The normal accrual basis VAT scheme is where you calculate and pay/claim VAT at 20% based on the date your customers are invoiced or the date you are billed. If you are on the normal accrual basis VAT scheme, you can use the VAT Return in Wave as it is.

Normal Cash VAT Return in Wave

The normal cash basis VAT scheme is where you calculate and pay/claim VAT at 20% based on the date your customers pay you or the date you pay suppliers. If you are on the normal cash basis VAT scheme, you need to adjust your VAT Return in Wave. The adjustments are shown below. You’ll need the Aged Receivables and Aged Payables reports both at the start and the end date of the VAT period.

Flat Rate Accruals VAT Return in Wave

Currently, calculating flat rate VAT in Wave isn’t possible. But you can easily find the VAT inclusive income amount you need by running a Sales Tax Report and adding the Payable amounts for before tax (net) and tax (VAT). Don’t forget that all income needs to be included in the flat rate scheme calculation, so you may want to use a ‘Zero’ rate or a ‘No VAT’ rate on income where VAT isn’t charged so that it appears in the report. Once you have your total VAT-inclusive income, just apply your flat rate percentage to calculate the VAT payable.

Flat Rate Cash VAT Return in Wave

Use the same workings for sales as shown above in Normal Cash VAT Return in Wave. Then add the net and VAT amounts, then apply your flat rate percentage to calculate the VAT payable.

Submitting your VAT Return

Currently, you can’t submit your VAT Return in Wave. So just like some other leading software, you have to log into your HMRC account and enter the amounts manually.

We can do your VAT Return in Wave for you

Our Quarterly package from just £40 plus VAT per month includes VAT returns as well as Accounts, Tax Returns, Management Accounts and general support and advice. Contact us for more details.

Wave Online Accounting is free cloud accounting software that you can use to easily do your bookkeeping and invite your online accountant to log in and use your bookkeeping to do your accounts and tax returns. We have more pages about Wave Online Accounting here.

Wave Online Accounting still doesn’t have a credit note facility yet, but there is a workaround to post and allocate credit notes on Wave.

To post a credit note on Wave, you have to create a new invoice with negative amounts.

Then to allocate the credit note against the invoice, you need to create a positive income transaction and a negative income transaction in the bank account. Both amounts need to be for the total credit value, so that they offset each other in the bank account and don’t change the bank balance. Then you need to allocate the positive receipt against the invoice, and the negative receipt against the credit note.

That’s it!

CloudBook Online Accountants are Wave Online Accounting specialists. So if you need more help with Wave’s free online accounting software, come back to view our helpsheets, or sign up for one of our low-cost fixed fee accounts packages which includes support with Wave or other online accounting software throughout the year.

UK Bank Feeds and MTD

Wave accounting no longer supports UK bank feeds or Making Tax Digital (MTD) returns. For software that does support these things, try Pandle. We will help you with any online accounting software.

Wave Accounting Review – Free Online Accounting Software

CloudBook Online Accountants are Wave Accounting specialists. If you want to get the most out of free online accounting software, you need experts like us to assist you throughout the year. As well as this, we set you up on Wave Accounting and show you how to use it, all included in our low fixed accountancy fees.

This is our Wave Accounting Review. Wave provides free online accounting software, funded by some small adverts. As it is completely free online accounting software, you can just sign up and have a play with it here: Wave Accounting.

Our Wave Accounting Review

If you’re looking for the best free online accounting software, we recommend Wave Accounting. It’s ideal for small businesses with straightforward accounts who don’t want to pay a lot (or anything!) to make their bookkeeping easier, and potentially their accountants fees cheaper (like ours!). Wave Accounting or Wave Apps as they are now called are able to supply free online accounting software by showing small discreet advertising to the side of the screen. You probably won’t even notice it and if you do, it might even be useful!

Just because you don’t have to pay for Wave Accounting’s free online accounting software, it doesn’t mean you’re sacrificing quality. If anything, you may not have the quantity of features that other expensive, cheap or free online accounting software provides, but if you don’t need those additional features, why pay for them?!

What you get with Wave Accounting’s free online accounting software

That’s not to say Wave Accounting hasn’t got great features and we’re going to tell you about what you can get from the free online accounting software including the following:

• Bank transaction feeds No longer provided in the UK/EU
• Bank statement uploads
• Automatic categorisation
• Receipt & invoice reader
• Document storage
• Invoicing
• Recurring invoices
• Get paid by credit card
• Reports
• Handles VAT No longer complies with UK VAT (MTD)
• Paypal integration

Banking & Paypal

Paypal and most bank accounts can be set up to feed transactions automatically (not in UK/EU) and securely into Wave Accounting’s free online accounting software. It saves you time entering anything or downloading and uploading statements. If your bank (or you) doesn’t support that, you should be able to download your bank statements from online banking in a common format (e.g. CSV), which can easily be uploaded into Wave Accounting in seconds. Saving you hours a year entering each transaction manually.

Wave Accounting doesn’t have a bank reconciliation facility as such. **See Update below** That’s because it’s designed to be led by your bank statement transactions, not by your cheque book or your income slips. Although it does allow you to verify each line, acting like a tick which could help you if you do still want to reconcile (i.e. tick off) the bank statements.

If you don’t have any of these facilities, you can always manually enter income and expenditure. It’s very easy, and still quicker than writing it in a cashbook, or on a spreadsheet.

**UPDATE** There is now a Wave Accounting bank reconciliation, and it works seamlessly in the transactions section. We think it’s a great addition to the software.

Receipt & Invoice Scanner and Storage

Another way Wave Accounting makes your life easier is with their free Receipts App. This is a really useful tool that you can download onto your mobile or tablet, so that you can take a photo of a receipt or invoice. It then reads the data on the document and uploads the data and the image into Wave Accounting’s free online accounting software. A great time saver!

However, following from above (regarding the lack of a bank reconciliation), this is probably best left for the transactions that don’t go through your main bank account. Instead we think this is great for recording cash income slips or expenses receipts, or costs and income that have gone through another bank account (e.g. personal).

We have found it to be inconsistent at times, for example picking up the change amount rather than the total amount. But it is getting better with regular updates. Also you get to review each one and if necessary correct any of the data before it hits your account. Overall we’re a big fan of the Receipts App provided by Wave Accounting’s free online accounting software!…

Invoicing & Bills

Ditch the wordprocesser and spreadsheet! Wave Accounting has a great invoicing module, producing professional looking invoices that can easily be downloaded as a PDF or emailed directly to your customer through the software. Using the second option you can register with Stripe to add a credit card payment option to you invoices (a small percentage fee is charged but only if your customer pays by credit card).

It’s so easy to use, you just enter everything or select options directly on the invoice, save, and then it’s in your accounts and ready to send. You can set an invoice to recur say every month. You can also copy a previously raised invoice and edit the details – another great time saver.

Each invoice has an option to raise a payment against it. Or this can be done from the bank transactions (recommended to avoid duplicating bank receipts). On the invoice summary page, at a glance you can see what is paid, due, overdue. Then you can resend the invoice if necessary to chase payment.

We have nothing negative to say about the invoicing provided by Wave Accounting’s free online accounting software. Although we recommend you check you’re happy with the look of the email that is sent to customers directly from the software before using it.

Bills (i.e. purchase invoices) are entered much the same way as sales invoices.

VAT

Wave Accounting handles VAT via its sales tax function, however, it does not comply with UK Making Tax Digital regulations. Set it up with the VAT rate and then remember to select VAT whenever you enter anything that affects your VAT return. It handles VAT on an invoice basis well, and you can use it for a cash basis, but it’s perhaps not as intuitive as other online accounting software. For the cash basis you will have to adjust for debtors and creditors on each VAT return. That’s where your accountant should be able to help, and we would include that in our quarterly reviews provided with our accounts packages.

Reporting

Essential reports are provided with the free online accounting software, which are usually enough for most small businesses including:

• Profit & loss account
• Aged debtors (i.e. receivables)
• Aged creditors (i.e. payables)
• Balance sheet
• Transactions by customer/supplier/category
• VAT summary and detailed
• Balance sheet

Other Useful Bits

There is an Accounting module which lets you enter journals (other adjustments not via bank, sales or purchases), and add or edit categories for your transactions.

You can add as many collaborators as you wish (e.g. your accountant, your bookkeeper) who will be able to log in and either view or also edit your accounts.

Each Wave Accounting account comes with Personal free online accounting software, which is a separate set of records for your personal finances. This is really useful if you often mix business with personal transactions because you can easily transfer to one or the other. It also comes with a budgeting tool.

Summary

They say you don’t get anything for nothing, well they were wrong in this case! Wave Accounting’s free online accounting software has all of the essentials in a really easy to use format. It is worth considering for all small businesses and even the not so small with straightforward accounts. We’re happy to support any business that uses Wave Accounting. You could potentially save hundreds on accounting software and even more with accountants fees. CloudBook Accountants are Wave Accounting specialists. Use our Fixed Fees Calculator on this page to see for yourself how much you could save. Or contact us with any questions you have.

Wave Accounting Review

This was our Wave Accounting Review of its Free Online Accounting Software. Also, because it is completely free online accounting software, you can just sign up and have a play with it here: Wave Accounting.

CloudBook Online Accountants are Wave Accounting specialists. We help our clients set up on Wave Accounting and show them how to use it. This, as well as ongoing help with Wave Accounting is included in our low fixed accountancy fees.

Here we explain the 2022 Xero Price Increase. How much Xero’s Prices are increasing. Why Xero’s prices are increasing. Also, the alternatives to Xero. With CloudBook Online Accountants, you can choose whichever software suits you the best.

The Xero Price Increase

Here are the Xero Price increases over the past two years:

Why are Xero’s Prices Increasing Again?

Xero state that they are constantly enhancing and improving their product. That the pricing is in line with the value of Xero in the current market. It will help Xero to respond quickly with new tools and services that business might need. Also that it will improve Xero in the future.

Has Xero improved?

In our opinion, Xero is certainly improving all of the time, however those changes are small. Where the changes are not small, they usually come at an extra cost, such as the Expenses or Projects add-ons. The core platform, in our opinion, has not improved enough over the past two years to justify up to a 40% increase in the Xero price over the past two years. Having said that, it is still the best online accounting software for small businesses. So if you can afford to continue using it, you should.

Alternatives to Xero Price Increase

Use CloudBook Online Accountants

With CloudBook Online Accountants, unlike other accountants, you can use whichever software you prefer. We don’t make you use Xero software, so you don’t have to pay their high prices. As well as that, you’ll probably save on accountancy fees too, with our low fixed monthly fees.

Downgrade Xero Plan

To avoid the price increase, could you downgrade your Xero plan? The Starter plan now has unlimited bank transactions and allows up to 20 sales invoices and 5 bills per month. Instead of using bills you could just attach them to the bank transaction. The Standard plan is only missing multi-currency which is only essential if you have foreign bank accounts. If you have few foreign currency transactions you could convert them manually.

Pandle

Pandle is unlimited and comes with multi-currency and bank feeds for £5pcm. We can get it for £2.50pcm. It’s relatively new, sometimes slow, and takes a while to get used to. However, it should cope with most things you use Xero for.

QuickBooks

QuickBooks is our next most popular software after Xero. It does most things that Xero can do and is quite easy to use. Their Simple package is £12pcm, Essentials £22pcm, Plus is £32pcm.

FreeAgent

FreeAgent is geared towards small business and freelancers. Natwest and RBS customers can get it for free. We can get it for our clients for £17.50pcm.

Kashflow

Kashflow is less popular than it used to be. However, if you have straightforward accounting transactions, it can work well for you. Starter is £9pcm, Business is £18pcm or with payroll is £24pcm.

QuickFile

Quickfile is used by a few of our clients. It’s less easy to use but it can be free if you have less than 1000 entries per year, otherwise it’s just £45pa. If you want automated bank feeds, that’s an extra £15pa.

Spreadsheets

If you’re not VAT registered, you could use a spreadsheet (e.g. Excel, Google Sheets, Numbers) to do your accounting. While we prefer online accounting software, if your accounting transactions are straightforward, a tidy spreadsheet would be ok. All transactions need to be categorised.

Our Own Software

We have our own free software which very basically allows you to list your sales and expenditure. It can also submit MTD VAT returns.

Other Online Accounting Software

There are many other online accounting software platforms available. We’ll consider doing your accounts etc using any online accounting software. Look out for ones that can link to UK bank accounts and are MTD compliant. Unfortunately, this excludes Wave accounting which is a free alternative if you don’t need those things.

Online accounting software has revolutionised the way accountants provide accountancy services. Businesses should get a better and cheaper service from their accountant by using online accounting software. It makes it easier to do your accounts, both the bookkeeping and then converting the online bookkeeping records into accounts. Read about 10 of the many benefits of getting your accounts online below.

In fact, HMRC will soon make it mandatory to use online accounting software, by requiring quarterly submissions of data. Making Tax Digital is already here for VAT registered businesses. It will soon be required for Income Tax, then Corporation Tax. Don’t worry if you’re not yet using online accounting software. We can help you move onto any one of them that you choose. Such as the free Pandle or the easy to use Xero.

Still need convincing?…

10 benefits of using online accounting software. 1-3:

• Do your accounts on the beach…
  Because online accounting software is in the cloud, it means you can log-in to do or view your accounts from anywhere, at anytime. At your customer’s site, in a pub, or even on the beach!

• Let the software do all the hard work…
  Import your bank statement, or easily set up an authorised feed from your bank account or Paypal to the secure online accounting software.  All you need to do is tell it what each transaction is for. So you don’t need to manually enter anything, but if you choose to do it this way, the software can automatically check and compare your records with the bank statements. There are also free apps that will read images of receipts and invoices and enter the data onto the software for you!

• Advice when you need it, not a year later…
  You can give us secure access to your online accounting software. So we can both look at your accounts and deal with any issues. In fact we’ll ask to look at your accounts regularly to see how you’re doing, and offer relevant timely advice.

More benefits of using online accounting software. 4-6:

• We don’t want your records!….
  At your period end, we don’t need you to bring in your records. We’ll just log into your online accounting software and view what we need to produce your accounts etc. We’ll let you know if we do need anything e.g. a scanned bank statement. Of course if we do your bookkeeping, we will need some form of records.

• FREE or low monthly charges…
  Wave Accounting Software is free, and we all love a bargain, but what’s the catch? Well you might notice some small discreet adverts, but they are tailored to your business, so they may even be useful. Others we also recommend charge a low monthly fee from between £5 and £19, so spreading the affordable cost over the year. Also, there are free trials and no tie in periods, so if you change your mind, no penalties.

• Easy to use software…
  You don’t need to be wizz on computers, or an accountant, or even a bookkeeper to use online accounting software. The providers we recommend have designed their software to be so easy you shouldn’t need help with it. But just in case you do, they all offer free support, and being local we are never far away. We’ll also help you get going with it, for free.

Even more benefits of using online accounting software. 7-10:

• Safer & securer than other records…
  Your accounts data is stored by the software providers on secured, monitored, and constantly backed up servers. Data security is a top priority, and some providers claim to be as secure as your online banking. Still not convinced? Ask yourself this: How secure are your paper records? – are they kept in a fireproof safe? Do you password protect and backup your spreadsheets? – are they encrypted when you email them? Do you backup your current software data daily? – is the backup stored securely offsite?

• Instant reports for your business…
  Each of the online accounting software comes with a bundle of reports so you’re likely to find what you need. So at the click of a button you can view all sorts of things about your business such as what you owe, who owes you, how much profit you made.

• Get off to the best start, not a false start…
  By logging into your accounts from anywhere, we can fix any errors there and then. Which means your reports are always accurate, and start off from the correct position. So there’s no need to wait for the year end adjustments from your accountant several months later, we will have already adjusted your online accounting software.

• Not low, NO maintenance bookkeeping…
  There’s no need to start a new page, or a new cashbook. No rolling forward of spreadsheets from one year to the next. There are no software updates to buy and load, this is done automatically. And no messing about sending records to and from your accountant, or trying to get software backups to restore onto the accountants’ version. So you just login and go – easy!

How we can help you

We are online accounting software specialists. We’re committed to giving you a better service for less, by utilising all of the benefits of online accounting. Plus we’re not tied to any particular software provider such as Xero, SageOne, or Kashflow, so you’ll get honest independent advice on which is best for your business. If the free one, Wave Accounting, is all you need then why pay for something else?

All of our accounts clients get free help moving to online accounting software, and free help throughout the year. See our fees, or contact us by clicking the buttons below.

CloudBook Accountants are BeanBalance accountants. BeanBalance is free online accounting software that you can use to do your bookkeeping and more. Do you use BeanBalance and need an accountant to do your accounts and tax returns? CloudBook Accountants can use BeanBalance to do those for you.

Why do I need an accountant for BeanBalance?

Free online accounting software like BeanBalance and Wave are great at helping you do your bookkeeping. If you know what you’re doing you may even be able to use BeanBalance to do your VAT and Payroll. Otherwise, you will need an accountant to check your VAT and Payroll before submitting to HMRC. You will definitely, despite what BeanBalance suggest, need an accountant to produce the reports required that comply with the latest laws and regulations (e.g. accounts, tax returns). Then submit the necessary reports to HMRC and if applicable Companies House. CloudBook Accountants can use BeanBalance to do your bookkeeping, accounts, tax returns, payroll and VAT returns.

What does BeanBalance do for me if I still need an accountant?