VAT Flat Rate Scheme Calculator: Will It Cost You More?
Use our VAT Flat Rate Scheme Calculator to estimate how much VAT you would pay HMRC under the scheme. Select your business sector and enter your annual turnover excluding VAT, plus goods purchases and other costs including VAT.
The calculator checks your spending on goods to see whether the 16.5% limited cost business rate applies. Your results update automatically and show whether you save money or pay more compared with standard VAT accounting.
Physical goods only, not services, equipment, food for staff, vehicles or fuel.
£
VAT to pay (Flat Rate Scheme)
£00123456789.0012345678900123456789£0.00
VAT to pay (standard)
£00123456789.0012345678900123456789£0.00
You save
£00123456789.0012345678900123456789£0.00
The VAT you charge
The VAT you charge
Paid to HMRC (Flat Rate Scheme)
£0.00
You keep
£0.00
VAT you charge customers
£0.00
Flat Rate vs standard
Flat Rate vs standard
Flat Rate Scheme
£0.00
Standard VAT accounting
£0.00
An estimate to help you understand the scheme, not tax advice. Uses the latest HMRC flat rates.
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How to Use Our Vat Flat Rate Scheme Calculator
Here is a detailed step by step process on how to calculate flat rate scheme vat with our calculator.
Choose Your Business Sector
Select the category that best matches the work your business does. If you carry out several activities, choose the one that generates the largest share of your turnover.
Your choice must reflect your business accurately, even if another category has a lower percentage.
Enter your total sales income for the year, excluding VAT.
Use the figure before business expenses are deducted, rather than your profit.
If you want to estimate your VAT for the year ahead, enter a realistic sales forecast for the next 12 months.
Add Your Spending on Relevant Goods Including VAT
Enter your annual spending on goods used exclusively for your business, including any VAT charged.
This includes items such as stock your business normally sells, materials, stationery and cleaning products.
Services and downloaded software do not count as relevant goods. Capital purchases such as laptops, and food or drink for you or your staff, are also excluded. Vehicle costs and fuel are excluded unless a transport business exception applies.
Enter your other annual business costs, including VAT, such as accountancy fees, advertising and software subscriptions. Exclude goods purchases already entered in the previous field.
The standard VAT comparison assumes these costs include 20% VAT that you can reclaim in full. Leave out wages, dividends and other payments without VAT, as the calculator would incorrectly treat part of those amounts as reclaimable VAT.
Also leave out capital purchases that qualify for VAT recovery under the Flat Rate Scheme. Assess these separately because the calculator does not include the VAT reclaim available on those purchases.
View Your Results
Your results update automatically as you change the figures. Adjust your entries to see how different costs affect the comparison, or select Clear to reset the calculator. Here are the results that our vat flat rate calculator shows.
VAT Payable Under the Flat Rate Scheme
This card shows your estimated annual VAT payment to HMRC under the Flat Rate Scheme.
It also displays the percentage used, so you can see whether the calculation uses your sector rate or the 16.5% limited cost business rate.
VAT Payable Under Standard VAT Accounting
This card shows your estimated annual VAT payment after deducting reclaimable VAT on business costs from the VAT charged on sales. Compare this with the Flat Rate Scheme figure to see which method gives you a lower payment.
Your Estimated Saving or Extra VAT Cost
You save shows the difference when the Flat Rate Scheme gives you a lower VAT bill. If standard VAT accounting produces a lower payment, the label changes to You’d pay more. This shows how much extra VAT you pay by using the scheme.
VAT Charged to Customers and the Amount You Keep
This breakdown splits the VAT you charge customers into the amount paid to HMRC and the amount you keep.
The You keep figure is before business expenses and tax on profits. Your saving against standard VAT accounting is shown separately and allows for the purchase VAT you would reclaim under that method.
How Our Flat Rate VAT Calculator Works
The calculator uses your figures to estimate your VAT payment under the Flat Rate Scheme and standard VAT accounting. To show how each result is calculated, we shall take the following example.
Business sector: Computer repair services
Annual turnover excluding VAT: £80,000
Relevant goods purchases including VAT: £6,000
Other business costs including VAT: £12,000
The calculation assumes 20% VAT on sales and entered costs, with purchase VAT fully recoverable under standard accounting.
1. Add VAT to Your Annual Turnover
Our vat flat rate calculator first calculates the VAT charged to customers, then adds it to your turnover. This gives the VAT-inclusive amount used for your Flat Rate Scheme payment.
VAT charged = Turnover excluding VAT × 20%
For our example:
£80,000 × 20% = £16,000 VAT charged
£80,000 + £16,000 = £96,000 turnover including VAT
2. Identify Your Business Sector Rate
Your selected business sector determines the starting flat rate percentage. The calculator then checks your goods spending to establish whether this rate applies.
For computer repair services, the sector rate is 10.5%. This is the percentage paid to HMRC under the scheme, rather than the VAT rate charged to customers.
The calculator does not apply the first-year one percentage point discount.
3. Check Whether the Limited Cost Rate Applies
The calculator compares your spending on relevant goods against 2% of your VAT-inclusive turnover and £1,000 per year. If your spending is below either threshold, it uses the 16.5% limited cost business rate.
£96,000 × 2% = £1,920
The business spends £6,000 on relevant goods. This exceeds both £1,920 and £1,000, so the calculator uses its 10.5% sector rate.
Other business costs do not count towards this test. HMRC requires the check for each VAT return period, so an annual estimate does not capture changes between periods.
4. Calculate Your Flat Rate VAT Payment
The calculator multiplies your turnover including VAT by the applicable percentage.
Your ordinary business costs are not deducted from this payment. The estimate also excludes separate VAT claims on qualifying capital goods.
5. Calculate Your Standard VAT Payment
The calculator estimates the VAT included in your goods purchases and other business costs. It divides their combined total by six because VAT makes up one-sixth of a VAT-inclusive amount at the 20% rate.
Estimated purchase VAT = (Goods purchases + Other business costs) ÷ 6
(£6,000 + £12,000) ÷ 6 = £3,000 purchase VAT
It then deducts this amount from the VAT charged to customers:
£16,000 − £3,000 = £13,000 payable to HMRC
If estimated purchase VAT exceeds sales VAT, the result is negative and represents an estimated VAT repayment.
6. Compare Your Saving or Extra VAT Cost
The calculator subtracts your Flat Rate Scheme payment from your standard VAT payment.
The result displays You save £2,920. If the Flat Rate Scheme produces a higher payment, the label changes to You’d pay more and shows the extra cost.
7. Show How Much VAT You Keep
The calculator deducts your Flat Rate Scheme payment from the VAT charged to customers:
£16,000 − £10,080 = £5,920 kept
This amount is before business expenses and tax on profits. Your business costs also include £3,000 in VAT paid to suppliers. Standard VAT accounting lets you reclaim that £3,000, while the Flat Rate Scheme does not allow this separate reclaim on ordinary purchases.
Your saving therefore accounts for that difference:
£5,920 − £3,000 = £2,920 saving
Limitations of Our Flat Rate VAT Calculator
The calculator gives you an annual comparison based on the figures you enter. It does not prepare or submit your VAT return. Here are some of its limitations.
Eligibility for the Flat Rate Scheme
The calculator does not confirm whether you qualify for the scheme. To join, you must be VAT registered and expect taxable turnover of £150,000 or less, excluding VAT, over the next 12 months. Other joining conditions also apply, so check your eligibility before applying.
Different VAT Rates and Special Transactions
There are no separate inputs for sales at different VAT rates, exempt income, overseas transactions or reverse charges. If your business has these transactions, you need a more detailed comparison using the actual VAT charged and reclaimed in your records.
Goods Purchased Without VAT
Relevant goods still count towards the limited cost business test when no VAT is charged. However, the standard VAT comparison assumes your entered costs include reclaimable VAT. It overstates the reclaim if those costs include purchases without VAT, so check the estimate against the VAT shown on your invoices.
VAT Claims on Capital Goods
The estimate excludes separate VAT claims on capital purchases. Under the Flat Rate Scheme, you can reclaim VAT on a qualifying single purchase of capital expenditure goods costing £2,000 or more, including VAT. The purchase must meet HMRC’s capital goods rules and VAT recovery conditions.
Assumptions Behind Your VAT Estimate
The calculator assumes:
All turnover entered is subject to 20% VAT.
Both cost fields contain purchases charged at 20%, with full VAT recovery available under standard accounting. The VAT element is one-sixth of those gross costs.
The selected flat rate applies throughout the annual estimate, with no separate deduction for ordinary purchase VAT.
Our calculator does not apply the first-year discount. Eligible businesses receive a reduction of one percentage point during their first year of VAT registration. For example, 10.5% becomes 9.5%, and 16.5% becomes 15.5%. The discount period runs from VAT registration, so joining the Flat Rate Scheme later does not restart it.
Need Help Choosing the Right VAT Scheme?
Your result gives you a starting point for comparing the schemes. Before making a change, check your business category, purchase invoices and any adjustments that affect the calculation.
Our VAT accountants can review your figures, confirm the applicable rate and explain how each option affects your business.
Book a free initial consultation to discuss whether the Flat Rate Scheme is suitable for you.
The joining threshold is £150,000 in expected taxable turnover for the next 12 months, excluding VAT. The usual leaving threshold is £230,000 including VAT, checked at your annual scheme review. You must also leave if you expect total business income above £230,000 including VAT in the next 30 days alone.
How much is the VAT flat rate scheme?
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You pay HMRC a percentage of your turnover including VAT. Current sector rates range from 4% to 14.5%, while limited cost businesses use 16.5%, before any first-year discount.
Can I Reclaim VAT on Purchases Under the Flat Rate Scheme?
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You cannot reclaim VAT separately on ordinary business purchases. You can reclaim VAT on qualifying capital goods costing £2,000 or more including VAT in a single purchase, subject to HMRC’s conditions.
Rita writes practical accounting and tax guidance for business owners, drawing on her experience supporting businesses with accounts, tax and financial management.
