VAT Flat Rate Scheme Calculator (UK 2024)
Calculate VAT due under the UK Flat Rate Scheme and compare with standard VAT accounting to find the most beneficial option.
VAT Flat Rate Scheme Guide
What Is the Flat Rate Scheme?
Flat Rate Scheme (FRS): simplified VAT for small businesses. Instead of recording all input and output VAT: pay HMRC a fixed percentage of your VAT-inclusive turnover. Eligibility: must be VAT-registered. Turnover under £150,000 (excl. VAT) to join. Must leave when turnover exceeds £230,000. Benefits: simpler bookkeeping. Less time on VAT returns. Often less VAT to pay (if business has low input VAT — service businesses). First year of VAT registration: 1% discount on FRS rate. Downsides: cannot
FRS Rates by Sector
Limited cost trader (since April 2017): 16.5%. Applies if input goods are less than 2% of turnover OR less than £1,000/year. This rate makes FRS rarely beneficial for service businesses (most are limited cost traders). Service sector typical: 13-14.5%. Consultancy, IT, legal: 14.5%. Hairdressing, beauty: 13%. Lower rates: retail food 4%. Construction labour-only 14.5%. Agriculture 6.5%. Online published rates: gov.uk/vat-flat-rate-scheme/work-out-your-flat-rate. Different rates per sector — choo
When FRS Saves Money
Calculate: output VAT collected = turnover × 20/120 (or 1/6). FRS VAT due = inclusive turnover × FRS rate. Savings if FRS < output VAT − input VAT. Service business with £85k inclusive turnover (£70,833 net), £500 input VAT/year, 14.5% FRS: standard: output £14,167 − input £500 = £13,667 VAT due. FRS: £85,000 × 14.5% = £12,325. Saving: £1,342. Limited cost trader same scenario at 16.5%: £85,000 × 16.5% = £14,025. Standard: £13,667. Loss: £358. Limited cost trader designation removed most service
Practical Considerations
Switching schemes: can join FRS when becoming VAT-registered or at any time. Notify HMRC. Effective from the date you specify. Switching out: notify HMRC. Effective from next quarter. Capital items: items over £2,000 (including VAT) can have input VAT reclaimed even under FRS. Pre-registration VAT: can claim back input VAT on assets bought up to 4 years before registration (still on books). Up to 6 months before registration for services. Best advice: model both schemes carefully. Re-evaluate an
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