UK VAT Flat Rate Scheme calculator

Rules and rates last checked: 11 October 2026. They match GOV.UK and HMRC VAT Notice 733. Sources are listed at the end of this page.

How the Flat Rate Scheme works

You still charge your customers VAT at the normal rate. Instead of paying HMRC the VAT you charged minus the VAT on your purchases, you pay a fixed percentage of your VAT-inclusive turnover and keep the difference. The percentage depends on your type of business. You generally cannot reclaim VAT on purchases, except on certain capital assets that cost £2,000 or more including VAT.

The flat rate is applied to the whole VAT-inclusive amount, not to the price before VAT. That is why the percentages look lower than 20%.

The 16.5% limited cost business rate

If you spend very little on goods, you are a limited cost business and pay 16.5% whatever your business type. GOV.UK says this applies if your spending on goods, including VAT, is less than either:

• 2% of your turnover
• £1,000 a year, if your costs are more than 2%

Put simply, the limit is the higher of 2% of your VAT-inclusive turnover and £1,000 a year. For a quarterly VAT Return the £1,000 becomes £250. HMRC's VAT Notice 733 counts only goods used just for your business. It leaves out capital expenditure of any value, food or drink for you or your staff, vehicles, vehicle parts and fuel (unless you run a transport business), rent, and any services.

If you mainly sell your time, you may buy few goods, so check this test before comparing business type rates. The calculator applies it for you.

Worked examples

An IT consultant with few goods. Sales are £60,000.00 including VAT, so the VAT charged is £10,000.00. Goods cost £300.00, under the limit of £1,200.00, so the rate is 16.5% rather than 14.5%. Flat Rate VAT is £9,900.00. On standard accounting, with £600.00 of VAT to reclaim, the VAT is £9,400.00. Here standard accounting costs £500.00 less.

The same consultant in the first year. The 1% first-year discount also applies to the limited cost rate, so the rate is 15.5% and Flat Rate VAT is £9,300.00. Now the Flat Rate Scheme costs £100.00 less.

A photographer who sells prints. Sales are £48,000.00 including VAT and printing materials cost £2,500.00, over the limit of £1,000.00, so the photography rate of 11% applies. Flat Rate VAT is £5,280.00. Standard accounting, with £1,200.00 of VAT to reclaim, gives £6,800.00. Here the Flat Rate Scheme costs £1,520.00 less.

Flat rates for common freelance businesses

Labour-only building or construction services means building services where the materials you supply are less than 10% of your turnover from those services. GOV.UK lists every business type and its rate on its what you pay page.

Who can join, and when you must leave

You can join if you are VAT-registered and expect your VAT taxable turnover to be £150,000 or less, excluding VAT, in the next 12 months. Some businesses cannot join, and GOV.UK lists them.

You must leave if, on the anniversary of joining, your turnover in the last 12 months was more than £230,000 including VAT, or you expect it to be in the next 12 months. You must also leave if you expect your total income in the next 30 days alone to be more than £230,000 including VAT.

Using it with other VAT schemes

You cannot use the Flat Rate Scheme with the Cash Accounting Scheme. The Flat Rate Scheme has its own cash-based method for working out turnover instead. You can also join the Annual Accounting Scheme, but you apply for it separately. The UK VAT calculator page summarises these schemes.

What this calculator assumes

• Every sale is standard-rated at 20%. If you make zero-rated, reduced-rate or exempt sales, the VAT you charge is lower than one sixth of your sales, and so is the VAT on standard accounting.
• All figures are for one year. The goods test uses the yearly £1,000.
• The VAT you could reclaim on capital assets of £2,000 or more is left out of the Flat Rate figure.
• It compares the VAT you pay. It does not compare the time each method takes to keep records.

The result is an estimate for general information. GOV.UK suggests talking to an accountant or tax adviser about whether a scheme suits you.

Questions

Is the Flat Rate Scheme worth it for a freelancer?

It depends on your rate and what you buy. On the 16.5% limited cost rate you pay HMRC 99% of the VAT you charge (16.5% of a total that is one sixth VAT) and cannot reclaim VAT on purchases, so standard accounting often costs about the same or less. A lower business type rate with few purchases is where the scheme tends to pay. Enter your own figures above.

Do I charge my customers the flat rate?

No. You charge VAT at the normal rate, usually 20%, and show it on your invoices as usual. The flat rate only decides how much of your turnover you pay to HMRC.

Does the first-year discount apply to the 16.5% rate?

Yes. VAT Notice 733 gives the example of a limited cost business in its first year of registration using 15.5%.

Can I reclaim VAT on purchases on the Flat Rate Scheme?

Generally not. The exception is certain capital assets, such as equipment, that cost £2,000 or more including VAT.

Sources

• GOV.UK: VAT Flat Rate Scheme (updated 11 November 2024, checked October 2026)
• GOV.UK: VAT Flat Rate Scheme, what you pay (flat rates and limited cost businesses)
• GOV.UK: VAT Flat Rate Scheme, who can join
• GOV.UK: VAT Flat Rate Scheme, if your circumstances change
• HMRC: Flat Rate Scheme for small businesses (VAT Notice 733) (updated 18 December 2025)