VAT scheme comparer
Compare standard VAT accounting against the flat rate scheme on your own numbers, and see which costs less.
Compare your VAT schemes
Change the numbers, the results update instantly.
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How it works
Under standard VAT accounting, you pay 20% VAT on sales and reclaim 20% VAT on qualifying costs. Under the flat rate scheme, you pay a fixed percentage of your gross turnover (turnover including VAT), and generally cannot reclaim VAT on costs, which is why it favours businesses with low VATable costs. Limited-cost traders use a higher flat rate percentage of 16.5%, set by HMRC. Choosing between schemes is something we work through as part of our VAT returns service, alongside our VAT registration guide.
Frequently asked questions
What counts as a limited-cost trader?
Broadly, a business that spends less than 2% of its VAT-inclusive turnover on goods, not services, in an accounting period, subject to a minimum spend test. HMRC sets a fixed 16.5% flat rate for these businesses.
Do I have to register for VAT?
Registration becomes mandatory once your rolling 12-month taxable turnover passes £90,000. Below that, voluntary registration can still make sense depending on your customers and costs.
Can I switch schemes later?
Yes, you can move between standard and flat rate accounting, usually from the start of a VAT period, though there are rules and sometimes a stock adjustment to consider.
Which scheme is usually cheaper for service businesses?
Service businesses with low costs, such as consultants and freelancers, often find the flat rate scheme cheaper because they have little VAT to reclaim under the standard method. This depends on your actual numbers, which is what this tool compares.
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These results are a simplified illustration based on 2026/27 rates, not advice. Your real position depends on your full circumstances. For a personalised answer, book a free consultation.
Numbers looking complicated?
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