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 the VAT flat rate scheme if your annual sales are 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 a 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 highly 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 the VAT standard rate scheme.

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

Calculate VAT payable under the VAT flat rate scheme

You multiply 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%. Let’s say, your income from your IT consulting business is £100,000 and you charge 20% VAT on top. Your total income inclusive VAT is £120,000. The VAT payable to HMRC would be £17,400.

Thereafter, you use these figures to prepare your VAT return.

The VAT percentage 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 business	Current VAT flat rate
Accountancy or bookkeeping	14.5%
Advertising	11%
Agricultural services	11%
Any other services not listed elsewhere	12%
Architect, civil and structural engineer or surveyor	14.5%
Boarding or care of animals	12%
Business services that are not listed elsewhere	12%
Catering services including restaurants and takeaways	12.5%
Computer and IT consultancy or data processing	14.5%
Computer repair services	10.5%
Entertainment or journalism	12.5%
Estate agency or property management services	12%
Farming or agricultural that is not listed elsewhere	6.5%
Film, radio, television or video production	13%
Financial services	13.5%
Forestry or fishing	10.5%
General building or construction services*	9.5%
Hairdressing or other beauty treatment services	13%
Hiring or renting goods	9.5%
Hotel or accommodation	10.5%
Investigation or security	12%
Labour only building or construction services*	14.5%
Laundry or dry cleaning services	12%
Lawyer or legal services	14.5%
Library, archive, museum or other cultural activity	9.5%
Management consultancy	14%
Manufacturing fabricated metal products	10.5%
Manufacturing food	9%
Manufacturing not listed elsewhere	9.5%
Manufacturing yarn, textiles or clothing	9%
Membership organization	8%
Mining or quarrying	10%
Packaging	9%
Photography	11%
Post offices	5%
Printing	8.5%
Publishing	11%
Pubs	6.5%
Real estate activity not listed elsewhere	14%
Repairing personal or household goods	10%
Repairing vehicles	8.5%
Retailing food, confectionery, tobacco, newspapers or children’s clothing	4%
Retailing pharmaceuticals, medical goods, cosmetics or toiletries	8%
Retailing that is not listed elsewhere	7.5%
Retailing vehicles or fuel	6.5%
Secretarial services	13%
Social work	11%
Sport or recreation	8.5%
Transport or storage, including couriers, freight, removals and taxis	10%
Travel agency	10.5%
Veterinary medicine	11%
Wholesaling agricultural products	8%
Wholesaling food	7.5%
Wholesaling that is not listed elsewhere	8.5%

*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.

Companies House filings

In addition, choosing the right VAT scheme and submit VAT returns to HMRC, you must deliver company accounts and confirmation statement to Companies House.