Flat Rate VAT Scheme Calculator

How the UK Flat Rate VAT Scheme Works

The Flat Rate Scheme (FRS) is an optional VAT accounting method for eligible small businesses. Instead of calculating output VAT and deducting most input VAT purchase by purchase, you apply the HMRC percentage for your main business sector to your VAT-inclusive flat rate turnover. You still normally charge customers the VAT rate that applies to the underlying supply, so the flat rate percentage is not the VAT rate you put on your customer invoices.

1. Check whether you can join

You generally need to be VAT registered and expect VAT taxable turnover of £150,000 or less, excluding VAT, in the next 12 months. HMRC also has exclusion rules covering recent departures from FRS, certain VAT groups or divisions, closely associated businesses, and some margin or capital-goods schemes. The £150,000 joining test is different from the £230,000 limit used when deciding whether an existing FRS business must leave.

2. Choose the correct sector rate

Your percentage is based on the business activity that best describes what you will do in the coming year. If you operate in more than one sector, HMRC says to use the sector expected to generate the largest share of turnover rather than splitting the turnover across several rates. The examples below are current GOV.UK rates; always check the official list for the precise trade description.

3. Check the limited cost business test

A limited cost business normally pays 16.5%. The annual test shown in this calculator uses relevant goods costing less than 2% of VAT-inclusive flat rate turnover, or less than £1,000 where that £1,000 threshold applies. Not every purchase counts as a relevant good: HMRC excludes categories such as capital expenditure goods, food and drink for consumption by the business or its staff, vehicles and vehicle parts unless specific conditions are met, and services. For actual VAT returns, the test can change from one accounting period to another and the £1,000 amount is proportionally reduced for shorter periods.

4. Apply the 1% first-year reduction when eligible

A business in its first year of VAT registration can generally reduce its FRS percentage by 1 percentage point until the day before its first VAT-registration anniversary. This period is measured from VAT registration, not from the date the business joins FRS. The reduction is subject to HMRC's conditions, including rules for businesses that registered late.

5. Understand what the calculator is comparing

FRS VAT is calculated from VAT-inclusive turnover. This calculator assumes the sales entered are standard-rated at 20%, then compares the resulting FRS payment with an illustrative standard-accounting liability after assumed recoverable input VAT. That comparison is not an HMRC assessment and should not be treated as a VAT return calculation where reverse charges, imports, exempt or reduced/zero-rated supplies, partial exemption, capital-goods rules or other adjustments apply.

6. Apply to join and keep the right records

If you are already VAT registered, HMRC's current application service uses form VAT600FRS. You need your business name and address, VAT registration number, main business activity, the full sector percentage before any 1% reduction, and your intended start date. Applications can be made through the online service, or by completing the form and sending it by post or email if the online service cannot be used. HMRC will confirm the start date; this is normally the beginning of the VAT period after the application is received.

7. Capital purchases and leaving FRS

Most input VAT is not separately reclaimed while using FRS because the flat rate is designed to account for input VAT on average. A specific concession allows recovery of VAT on a single qualifying purchase of capital expenditure goods costing £2,000 or more including VAT. An FRS business normally has to leave if it exceeds the £230,000 turnover test or becomes otherwise ineligible. Notice 733 also contains a specific anniversary exception where HMRC is satisfied that the business's total income for the next 12 months will not exceed £191,500. After leaving voluntarily, HMRC says you normally wait 12 months before rejoining.

Frequently Asked Questions (6 Detailed FAQs)

Key Statutory Benchmarks (2026)