Free tool

Flat Rate Scheme calculator

See whether paying VAT at a flat percentage of your takings would leave you better or worse off than the standard way.

Sales in a year, before VATYour type of businessGoods you buy in a year, including VATPhysical goods used only for the business (not services, food, fuel or equipment). Under 2% of sales leaves you a limited cost trader.VAT you'd reclaim on purchases normallyFirst year of VAT registration (1% off the flat rate)

The Flat Rate Scheme would cost you

£480.00 a year

VAT you charge (20%)£12,000.00

Standard scheme: VAT to payVAT charged minus VAT reclaimed£11,400.00

Flat rate: 16.5% of £72,000.00Limited cost trader rate of 16.5%£11,880.00

VAT figures from your own invoices.Fenquist works out the VAT on every invoice and expense and shows your VAT return figures for each quarter.

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How the scheme works

On the Flat Rate Scheme you still charge your customers 20% VAT, but you pay HMRC a fixed percentage of your VAT-inclusive takings instead of the difference between VAT charged and VAT paid. You usually can't reclaim VAT on purchases, apart from some capital items over £2,000.

If you spend less than 2% of your takings (or under £1,000 a year) on goods, you're a limited cost trader and pay 16.5%, which rarely saves anything. You can join with taxable turnover up to £150,000 before VAT and must leave if it passes £230,000 including VAT.

What counts as goods for the limited cost test?

Physical goods used only for your business. Services, food and drink for you or your staff, vehicles and fuel (unless you're in transport), and capital items don't count.

Is there a first-year discount?

Yes. In your first year of VAT registration your flat rate is 1% lower.

Can I leave the scheme?

Yes, by telling HMRC. You then can't rejoin for 12 months.

VAT figures from your real invoices.

Fenquist shows your VAT for each quarter from what you invoice and spend.

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