Calculate your VAT liability under the UK's Flat Rate Scheme. Compare it against the standard rate to see your potential savings.
VAT to pay under Flat Rate Scheme
£6,750.00
VAT you would pay under standard rate
£8,333.33
Potential saving with Flat Rate Scheme
£1,583.33
Effective VAT rate on net turnover
16.20%
The Flat Rate VAT Scheme is designed by HMRC to simplify how small businesses handle their Value Added Tax (VAT). Instead of the complex process of recording and calculating VAT on every individual sale and purchase, businesses on this scheme pay a fixed percentage of their VAT-inclusive turnover. The specific percentage is determined by the industry sector the business operates in. This approach significantly reduces the administrative burden, freeing up valuable time for business owners.
The core benefit of the scheme is its simplicity. However, a key feature is that you cannot normally reclaim the VAT paid on business expenses and purchases. The lower flat rate percentage is intended to compensate for this. The scheme is best suited for businesses with low costs and limited purchases, such as consultants, freelancers, and other service-based enterprises. For businesses that buy a lot of goods, the standard VAT scheme, where you can reclaim input VAT, might be more financially advantageous. Our standard VAT calculator can help analyse that scenario.
To be eligible, your VAT taxable turnover must be £150,000 or less per year. As a further incentive, businesses in their first year of VAT registration receive a 1% reduction in their flat rate. This calculator helps you to visualise the financial difference between the Flat Rate Scheme and the standard VAT method, allowing you to make an informed decision about which is the right choice for your company's specific circumstances.