FullWorkings UK tax and finance calculators

VAT Flat Rate Scheme

2026

Your year

Turnover including VATEverything you invoice, with the VAT on it. That is the base the flat rate is charged on. £
Your sector's flat rateFrom gov.uk's list of business types. This is the one figure this site does not hold — see below.
Purchases including VATWhat you buy from VAT-registered suppliers. Only used for the standard-accounting comparison. £
Spend on goodsGoods only — not services, not rent, not fuel for a car. It decides the limited cost test. £
First year VAT-registeredWorth a discount off whichever rate applies.

What you would pay HMRC

On the Flat Rate Scheme £0.00 a year
Verdict—
Rate used—
Limited cost business—
Eligibility—

Standard accounting, for comparison

VAT charged on sales£0.00
VAT reclaimed on purchases£0.00
Paid to HMRC£0.00
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How this is worked out

On the Flat Rate Scheme you pay a fixed percentage of your turnover to HMRC and keep the difference, but you cannot reclaim VAT on what you buy. Whether that is a good deal depends entirely on how much you buy.

⚠ The flat rate is charged on VAT-INCLUSIVE turnover

That is what makes a 12% flat rate much less generous than it looks against 20%. On £120,000 of gross sales, 12% is £14,400 — not the £12,000 you get by applying it to the net figure. Every comparison that applies the flat rate to net turnover flatters the scheme.

⚠ The limited cost test catches most consultants

If your spend on goods is below both a small share of turnover and a cash floor, you are a limited cost business and pay 16.5% whatever your sector's rate says. At that rate the scheme is almost never worth having.

Goods means goods. Services do not count, and neither do rent, accountancy, advertising, travel, or fuel for a car you also use privately. A software consultant with a laptop and a phone contract has almost no qualifying goods at all, which is exactly who the rule was aimed at.

The first-year discount

A discount off whichever rate applies, for the first year you are VAT-registered. It runs from the registration date, not from the date you join the scheme, and it applies to the limited cost rate too.

⚠ The sector percentage is the one figure this site does not hold

gov.uk publishes around fifty of them, several with historical variants for the same trade. Every rate on this site is read off gov.uk and signed off by a person before it is used, and fifty percentages is a great deal of reading to do properly — shipping them unchecked would break the only promise this site makes.

So enter your own, from gov.uk's list of flat rates by business type. Everything else here — the limited cost test, the discount, the comparison with standard accounting — is the part that is actually hard, and none of it is on gov.uk's own page.

What this does not cover

Capital assets over £2,000, on which you can still reclaim VAT while on the scheme. The scheme's own cash-based turnover method. Leaving the scheme, which you must do once turnover goes far enough over the limit. Businesses closely associated with another. And whether the scheme is right for you, which depends on how your purchases will change — this compares a year you already know against a year you are guessing at.

Where these figures come from

Every rate above is read from a dated rate file rather than written into the page, and each one is checked against the gov.uk page it came from. How these numbers are kept right sets out the whole process.

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