VAT flat rate

VAT flat rate scheme set a fixed percentage to be applied when calculating your VAT payable to HM Revenue and Customs.

Your company may opt for VAT flat rate scheme if your annual sales is up to £150,000. Under this scheme, the business is not required to keep records on input tax on every purchase transaction. This may save considerable amount of time on VAT administration. However, businesses still need to keep records of their gross purchases and expenses for corporation tax purposes or income tax purposes.

No record for input tax

Your company charge a standard rate of VAT on sales as usual. The difference of this scheme to that of the standard VAT scheme is that your company does not need to account for input tax on expenses. Your company simply pays a percentage of VAT on sales including all reduced, zero-rated and exempt sales to HM Revenue and Customs.

VAT accounting records

It is high recommended for your company to keep your accounting records the same way as you would if you are under the Standard VAT scheme. This would enable you to monitor and compare if your company is paying more VAT under the VAT flat rate scheme to HMRC. If your company is persistently paying extra VAT, consider opting back to VAT standard rate scheme.

Your company must leave the flat rate scheme when its sales exceeded £150,000.

Calculate VAT payable under VAT flat rate scheme

You multiple your sales inclusive of VAT charged to your customers with the VAT flat rate applicable to your business.

For example, you provide IT consulting services. Your VAT flat rate is 14.5%. Lets say, your income from your consulting business is £10,000 and you charge 20% VAT on top. Your total income inclusive VAT is £12,000. The VAT payable to HMRC would be £1,740.

The VAT rates for businesses approved under the flat rate scheme vary and it is dependent on the business sector you are in.

VAT flat rate percentage by business sector
Type of businessCurrent VAT flat rate
Accountancy or bookkeeping14.5%
Advertising11%
Agricultural services11%
Any other services not listed elsewhere12%
Architect, civil and structural engineer or surveyor14.5%
Boarding or care of animals12%
Business services that are not listed elsewhere12%
Catering services including restaurants and takeaways12.5%
Computer and IT consultancy or data processing14.5%
Computer repair services10.5%
Entertainment or journalism12.5%
Estate agency or property management services12%
Farming or agricultural that is not listed elsewhere6.5%
Film, radio, television or video production13%
Financial services13.5%
Forestry or fishing10.5%
General building or construction services*9.5%
Hairdressing or other beauty treatment services13%
Hiring or renting goods9.5%
Hotel or accommodation10.5%
Investigation or security12%
Labour only building or construction services*14.5%
Laundry or dry cleaning services12%
Lawyer or legal services14.5%
Library, archive, museum or other cultural activity9.5%
Management consultancy14%
Manufacturing fabricated metal products10.5%
Manufacturing food9%
Manufacturing not listed elsewhere 9.5%
Manufacturing yarn, textiles or clothing9%
Membership organization8%
Mining or quarrying10%
Packaging9%
Photography11%
Post offices5%
Printing8.5%
Publishing11%
Pubs6.5%
Real estate activity not listed elsewhere14%
Repairing personal or household goods10%
Repairing vehicles8.5%
Retailing food, confectionery, tobacco, newspapers or children’s clothing4%
Retailing pharmaceuticals, medical goods, cosmetics or toiletries8%
Retailing that is not listed elsewhere7.5%
Retailing vehicles or fuel6.5%
Secretarial services13%
Social work11%
Sport or recreation8.5%
Transport or storage, including couriers, freight, removals and taxis10%
Travel agency10.5%
Veterinary medicine11%
Wholesaling agricultural products8%
Wholesaling food7.5%
Wholesaling that is not listed elsewhere8.5%

*Labour only building or construction services means building or construction services where the materials costs supplied is less than 10% of relevant turnover from such services. If more than this amount, your business is classed as general building or construction services.

Seek accountants advice if you have any questions about VAT flat rate scheme.

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