VAT Flat Rate Scheme Calculator

How the flat rate scheme works

Under the UK flat rate scheme (FRS) you charge your customers normal VAT (usually 20%), but you pay HMRC a single flat percentage of your VAT-inclusive turnover instead of the difference between output and input VAT. The percentage depends on your business sector — from 4% for food retail up to 14.5% for IT consultancy.

The trade-off: you normally cannot reclaim input VAT on purchases (with a narrow exception for capital goods over £2,000), so the scheme suits businesses with few VAT-bearing costs. If most of your spending is on zero-rated or exempt items, or you have large equipment purchases, the standard scheme may work out better — run both numbers before deciding.

Worked examples

IT consultant, £60,000 gross turnover, 14.5% rate: flat rate VAT due = £60,000 × 14.5% = £8,700. On the standard scheme you would have charged £10,000 of VAT (£60,000 ÷ 6), so with minimal input VAT the flat rate is up to roughly £1,300 ahead — your own costs decide the exact figure.

Limited cost trader, £60,000 gross turnover: the same business, if classified as a limited cost trader, must use the 16.5% rate: £60,000 × 16.5% = £9,900 — close to the £10,000 charged on the standard scheme, so the benefit nearly disappears.

Enter your own figures in the calculator above to see where you land.

So is it worth it? A 20-second check

Two profiles decide it, most of the time:

• Usually a win: service businesses with few VAT-bearing costs. A consultant at 14.5% on £60,000 turnover pays £8,700 instead of £10,000, and modest receipt piles don't change that much.
• Often a loss: limited cost traders, goods-heavy businesses, and anyone planning a large standard-rated purchase — the 16.5% rate plus the lost input VAT can wipe out the saving.

If you're near the line, model both options with your real numbers. The UK VAT calculator handles the standard-scheme side, and the small business guide covers the registration decisions around it.

Who can use it — and the limited cost trader rule

• Joining: you can apply if your VAT-exclusive turnover is £150,000 or less. You normally stay on the scheme for at least a year.
• Leaving: you must leave when your VAT-exclusive turnover exceeds £230,000.
• Limited cost trader: if your spending on goods is low relative to turnover, a 16.5% rate applies. Whether you count as one depends on the actual proportion of goods costs — check HMRC's test carefully, because services spending usually does not count.
• First year: a 1% reduction on the flat rate is available in your first year of VAT registration — confirm the current rules with HMRC.

Flat rate percentages are indicative presets for planning. The rates and rules are set by HMRC — always check the current flat rate scheme guidance before filing.

Frequently asked questions

Last reviewed: 16 October 2026 · Sector rates are indicative presets — verify with HMRC before filing. Methodology · Editorial standards · Report an error