Fill in your figures, then click Compare the two methods.
Result
| Method | VAT paid to HMRC | How it was worked out |
|---|
What to keep in mind
| Point | What it means |
|---|
What it does, and what it leaves to you
- Covers: the sector flat rate, the 16.5% limited cost trader test, the 1% first-year discount, capital asset reclaim, and the join and leave turnover limits.
- Gives: annual VAT paid under each method and the difference.
- Not decided: zero-rated or exempt sales, mixed trades, partial exemption, annual accounting timing, and whether a given purchase counts as relevant goods.
Common questions
How does the VAT Flat Rate Scheme work?
You still charge your customers 20% VAT, but you pay HMRC a fixed percentage of your VAT-inclusive turnover, set by your trade sector, instead of output VAT minus input VAT. You generally cannot reclaim VAT on purchases, except single capital assets costing £2,000 or more including VAT.
What is a limited cost trader?
A business whose VAT-inclusive spend on relevant goods is under 2% of its VAT-inclusive turnover, or under £1,000 a year. It must use a flat rate of 16.5% instead of its sector rate, which usually makes the scheme worse than standard accounting for service businesses.
Who can join the Flat Rate Scheme?
Businesses expecting VAT-taxable turnover of £150,000 or less excluding VAT in the next 12 months. You must leave when total income including VAT passes £230,000.
What is the 1% first-year discount?
In your first year of VAT registration you can take 1 percentage point off your sector flat rate. This tool does not apply it to the 16.5% limited cost trader rate; verify on GOV.UK.
Is the Flat Rate Scheme always cheaper?
No. If you buy a lot of standard-rated goods and services you can reclaim VAT on, standard accounting often leaves you better off, and it also gives refunds when your input VAT exceeds your output VAT.
Is my data uploaded anywhere?
No. Everything is calculated in your browser and nothing is sent.