Business category matters
Different trade sectors use different flat-rate percentages. The correct category must be considered carefully.
VAT services
Could Flat Rate VAT work for you?
The Flat Rate Scheme can simplify the calculation of VAT for some smaller businesses. Whether it offers a financial advantage depends on your circumstances, your sector and how much you spend on goods.
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The basics
How the scheme works
Under the Flat Rate Scheme, you usually calculate the VAT payable to HMRC by applying an appropriate flat-rate percentage to your VAT-inclusive turnover. You still charge VAT to customers in the normal way. You generally cannot reclaim input VAT on most purchases, although certain capital asset purchases can qualify for different treatment.
Eligibility at a glance
Key thresholds and rules
| Item | Current rule |
|---|---|
| Joining threshold | Expected VAT taxable turnover of £150,000 or less, excluding VAT, in the next 12 months |
| Leaving threshold | Normally leave if turnover exceeds the applicable £230,000 threshold |
| Limited cost trader | 16.5% flat rate may apply, depending on eligible goods expenditure |
| First year of VAT registration | 1 percentage point discount on the applicable flat rate |
Limited cost traders: a business can be treated as limited cost if relevant goods cost less than 2% of turnover, or if above 2% but below £1,000 per year. Specific goods are excluded from the calculation. Ask us to review the rules before choosing a percentage.
VAT support
How MLE Accounting can help
Our practice can review the turnover figures, discuss whether the scheme fits your business and support the reporting and record-keeping work involved.
Email enquiries
Unsure about Flat Rate VAT?
Send us a short description of your business and we can discuss whether the scheme is worth considering.