When you run a business you incur costs for your bank account. You use this account for payments, income and fixed expenses, so bank charges are part of your business. The rules are clear, because banking services are VAT-exempt and business costs lower your profit. This article explains what is and isn't deductible.
Is there VAT on bank charges?
There is no VAT on bank charges, because financial services are VAT-exempt. Banks charge no VAT on transaction costs, service costs or the use of your payment account. So you can't reclaim this VAT, simply because there is none. As a result, bank charges don't belong in your VAT return.
Are bank charges deductible?
Bank charges are business costs when you incur them for your business. You may deduct them from your profit, which lowers your income tax. This applies to monthly subscription costs, per-transaction costs and service costs on your account. These are fully deductible with a business account, because there's no personal part.
If you use a personal account, the business part is harder to determine. That's why many entrepreneurs choose a separate business account, so all costs are clearly attributable.
How do you record bank charges?
You record bank charges without VAT, because they're VAT-exempt. In your bookkeeping software choose the bank charges category and select 'no VAT'. Record bank charges in the year of payment. Check your statements monthly, because bank charges are often debited automatically and easily overlooked.
Note one exception: renting a card terminal is not covered by the exemption, so it does carry VAT. You may deduct that VAT when you are VAT-liable.
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
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