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VAT Flat Rate Scheme calculator

Work out VAT under the Flat Rate Scheme for your business type, run the limited cost trader test (16.5%) and compare it with standard VAT accounting. Uses GOV.UK rates; runs in your browser and nothing is stored.

How the calculator works

Under the Flat Rate Scheme you pay HMRC a fixed percentage of your VAT-inclusive turnover and generally can't reclaim VAT on purchases, except certain capital assets over £2,000 (GOV.UK). The rate depends on your business type, with 1% off in your first year of VAT registration. You can join if you expect VAT taxable turnover of £150,000 or less, excluding VAT, in the next 12 months (GOV.UK).

The limited cost trader test

You must use 16.5% if your spending on relevant goods, including VAT, is less than 2% of your flat rate turnover, or more than 2% but less than £1,000 a year (£250 for a quarterly return). HMRC's own examples: £10,000 flat rate turnover in a quarter with £260 of relevant goods uses the sector rate; £20,000 with £325 uses 16.5%, because £325 is less than 2% (£400) (VAT Notice 733, section 4). The 1% first-year discount applies to 16.5% too, giving 15.5%.

Relevant goods are goods used only for your business. They don't include vehicle costs and fuel (unless you're in transport), food or drink for you or staff, capital goods, goods for resale unless selling is your main business, gifts and promotional items, or any services. HMRC's examples that do count include stationery, gas and electricity used only for the business, cleaning products, hair products used in hairdressing, and goods from a subcontractor itemised separately. Because the test runs each return, you can move between 16.5% and your sector rate from one quarter to the next.

Building and construction rates

Labour-only building or construction services (materials under 10% of turnover for those services) use 14.5%; general building or construction services use 9.5% (GOV.UK). A labour-only trade buying few goods will often fall into the 16.5% limited cost rate, which can cost more than standard VAT accounting.

Not registered yet? Check the VAT threshold checker and read should I register for VAT? Price jobs with VAT using the quote and VAT calculator, and keep records with Xero, Sage or Zoho Books.

Based on GOV.UK and VAT Notice 733, checked 15 October 2026. Not tax advice: the scheme suits some businesses and not others, so ask an accountant if unsure.

Questions

What is the limited cost trader rate?

16.5% of VAT-inclusive turnover, used when your relevant goods are less than 2% of flat rate turnover or less than £1,000 a year (£250 a quarter).

Does the 1% first-year discount apply to 16.5%?

Yes. HMRC's example shows a limited cost business using 15.5% in its first year of VAT registration.

Is the flat rate worked out on turnover including VAT?

Yes. You apply the percentage to your VAT-inclusive turnover. GOV.UK's example: £1,200 billed at 11% is £132.

What's the flat rate for builders?

9.5% for general building or construction services and 14.5% for labour-only, where materials are under 10% of turnover for those services.

Can I reclaim VAT on purchases?

Generally not, except certain capital assets over £2,000.