Figures are per VAT period for a rough comparison. The flat rate applies to gross turnover; a 1% discount applies in your first year on the scheme, and limited-cost businesses use 16.5%. Not tax advice.
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This calculator compares the VAT you would pay HMRC under the Flat Rate Scheme against standard VAT accounting. Enter your VAT-inclusive turnover, your flat rate percentage, the VAT rate you charge and the VAT you could reclaim on costs, and it shows what each scheme would cost you.
It is for VAT-registered tradespeople deciding which scheme to use. The Flat Rate Scheme keeps VAT simple — you pay a fixed percentage of gross turnover and do not reclaim VAT on most purchases — while standard accounting means charging VAT, reclaiming it on costs, and paying HMRC the difference.
Which one wins depends on how much VAT you incur on purchases. Trades that buy a lot of materials often do better on standard accounting because they reclaim that input VAT; labour-heavy trades with few costs often do better on the flat rate.
Flat rate owed = gross turnover × flat rate%; Standard owed = (net turnover × VAT%) − reclaimable input VAT
Under the Flat Rate Scheme you pay a fixed percentage of your VAT-inclusive (gross) turnover and generally cannot reclaim VAT on purchases. Under standard accounting you pay the VAT you charged customers on your net sales, minus the VAT you reclaim on your costs. The calculator shows both and tells you which is cheaper.
Type your gross turnover for the period, including the VAT you charged. The Flat Rate Scheme percentage is applied to this gross figure, which catches people out.
Enter the flat rate for your trade sector from HMRC's list. Remember there is a 1% discount in your first year of registration, and a 16.5% rate for 'limited cost businesses' with very low material spend.
Enter the VAT rate you charge customers (usually 20%) and the total VAT you could reclaim on your purchases and costs for the period under standard accounting.
The calculator shows the VAT owed under each scheme and how much the cheaper option saves you for the period.
The Flat Rate Scheme percentage applies to your gross, VAT-inclusive turnover — not your net sales — which is why the flat percentage is lower than the headline VAT rate. You charge customers 20% as normal, but pay HMRC only the flat percentage of the gross, and keep the difference. In exchange you cannot reclaim VAT on most purchases.
The scheme rarely suits trades that buy a lot of materials. Since 2017, businesses spending very little on goods are classed as 'limited cost businesses' and must use a 16.5% flat rate, which almost always makes standard accounting cheaper. If you reclaim meaningful input VAT on materials, standard accounting usually wins.
This is a per-period comparison to guide the decision, not a full appraisal. Do not forget the 1% first-year discount, capital asset rules, and the fact that the flat rate saves admin time as well as money. Confirm your sector's rate and eligibility with HMRC or your accountant before joining or leaving the scheme.
Figures are per VAT period for a rough comparison. The flat rate applies to gross turnover; a 1% discount applies in your first year on the scheme, and limited-cost businesses use 16.5%. Not tax advice.
It depends on your material spend. Labour-heavy trades with few purchases — where you would reclaim little input VAT anyway — often pay less overall and save admin time on the flat rate. Trades that buy a lot of materials usually do better on standard accounting because they reclaim the VAT on those materials. Enter your figures above to see which wins for you.
You still charge customers the normal 20% VAT, but you pay HMRC only a fixed percentage of your gross (VAT-inclusive) turnover and keep the rest. The percentage depends on your trade sector. Because it is applied to the gross figure, a rate like 9.5% is not as generous as it first looks — but you also give up reclaiming VAT on purchases.
A limited cost business is one that spends very little on goods — broadly less than 2% of turnover, or under £1,000 a year — such as many labour-only subcontractors. If you fall into this category you must use the 16.5% flat rate, which almost always makes the Flat Rate Scheme more expensive than standard accounting.
Generally no. The trade-off for the simpler flat percentage is that you cannot reclaim VAT on most purchases. The main exception is capital assets costing £2,000 or more including VAT, on which you can still claim. This is the key reason material-heavy trades are usually better off on standard accounting.