VAT Flat Rate Scheme Calculator

Compare VAT Flat Rate Scheme vs standard VAT for your business sector. See if you save or lose.

Last updated: April 2026 · Source: GOV.UK – VAT Flat Rate Scheme

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Disclaimer

This calculator is provided for informational purposes only and should not be considered as financial or tax advice. All calculations are performed locally in your browser — no personal data is collected or sent to our servers. Rates and thresholds are sourced from HMRC and GOV.UK and are updated for the current tax year. Always verify results with HMRC or consult a qualified professional before making financial decisions.

How It Works

The VAT Flat Rate Scheme simplifies VAT accounting for small businesses with VAT-taxable turnover of £150,000 or less (excluding VAT). Instead of tracking VAT on every purchase and sale, you charge customers the standard 20% VAT but pay HMRC a fixed percentage of your gross (VAT-inclusive) turnover. The flat rate percentage varies by business sector—for example, 14.5% for computer and IT consultancy, 12% for management consultancy, and 10% for real estate. You keep the difference between the 20% charged and the flat rate paid.

In the first year of VAT registration, you receive an additional 1% discount on the flat rate, reducing the percentage by one point. However, the limited cost trader rule applies if your goods purchases (excluding capital expenditure over £2,000) are less than 2% of turnover or under £1,000 per year—in which case a flat rate of 16.5% applies regardless of sector, significantly reducing the scheme's benefit for service-based businesses with low material costs.

To determine if the flat rate scheme saves money, compare: (a) VAT collected from customers (20% of net sales) minus (b) VAT on purchases you could reclaim under standard accounting, against (c) the flat rate payment. The scheme saves admin time by eliminating the need to track VAT on individual purchases, but you cannot reclaim VAT on most purchases (except capital assets over £2,000 including VAT). You can leave the scheme if turnover exceeds £230,000 including VAT, or voluntarily at any time.

Flat Rate VAT for an IT consultant billing £8,000/month

  1. Monthly invoices: £8,000 net + £1,600 VAT = £9,600 gross.
  2. Flat rate for IT consultancy: 14.5% (13.5% in first year).
  3. VAT payment to HMRC: £9,600 × 14.5% = £1,392.
  4. Under standard VAT, you'd pay £1,600 collected minus £250 reclaimable on expenses = £1,350.
  5. Flat rate costs £42 more per month in this scenario. Check if the admin time saved justifies the cost.

Source: GOV.UK – VAT Flat Rate Scheme

Frequently Asked Questions

What does the VAT Flat Rate Scheme Calculator do?
Compare VAT Flat Rate Scheme vs standard VAT for your business sector. See if you save or lose. All calculations are performed in your browser using official UK rates and thresholds.
Is this calculator updated for the 2025/26 tax year?
Yes. This calculator uses the latest HMRC rates and thresholds for the 2025/26 UK tax year, which runs from 6 April 2025 to 5 April 2026. Rates are verified against official HMRC publications.
Do I need to tell HMRC about this?
Whether you need to report to HMRC depends on your individual circumstances. If you are unsure, check GOV.UK or contact HMRC directly. This calculator provides estimates for guidance only.