Flat Rate VAT Calculator 2026/27
Find out what the VAT Flat Rate Scheme is actually worth to you. The flat rate percentage applies to your VAT-inclusive turnover, and the limited cost business test pushes most one-person consultancies to 16.5% — where the scheme is worth close to nothing.
Flat Rate Scheme vs standard accounting
What you invoice clients before VAT over twelve months.
Your sector sets the headline percentage. The limited cost test can override it.
Goods only, never services. Below 2% of flat-rate turnover — or below £1,000 a year — and you drop to 16.5%.
Everything you could reclaim VAT on at 20% under standard accounting. Used for the comparison only.
Enter your figures to run the test.
Step 1 — the base the percentage is applied to
Step 2 — what the scheme gains or costs you
The join test is measured excluding VAT. Both leave tests are measured including VAT. Quarterly figures are annualised by multiplying by four, which is an estimate — the statutory tests use your actual 12-month figures.
| Test | Your figure | Limit | Result |
|---|---|---|---|
| Join — turnover excluding VAT, next 12 months | £90,000.00 | £150,000 | Eligible to join |
| Anniversary — VAT-inclusive turnover, previous 12 months | £108,000.00 | £230,000 | May stay |
| Forward look — VAT-inclusive turnover, next 30 days alone | Your own estimate | £230,000 | Leave immediately if you expect to exceed it |
Click any row to load it into the calculator. Every figure below is produced by the calculator itself.
| Turnover ex VAT | Sector | Relevant goods | Rate used | FRS bill | Standard bill | FRS gain |
|---|
The flat rate percentage applies to your VAT-inclusive turnover, not to the net value of your invoices. On £90,000 of net turnover you charge £18,000 of VAT, so your flat rate turnover is £108,000. A 14.5% flat rate is 14.5% of £108,000 = £15,660 — not 14.5% of £90,000 (£13,050). That £2,610 gap is the single most common mistake made with this scheme.
You are a limited cost business if your spend on relevant goods, including VAT, is less than 2% of your VAT-inclusive flat rate turnover, or is more than 2% but less than £1,000 a year (£250 a quarter). If either limb applies you must use 16.5% instead of your sector rate — 15.5% if you also qualify for the first-year discount.
16.5% of a VAT-inclusive figure is 19.8% of the net figure you invoiced, and you charged your client 20%. On £90,000 of net turnover you charge £18,000 of VAT, pay HMRC £17,820 and keep £180 — while giving up input VAT recovery on your running costs. With £4,000 of VATable purchases (£800 of input VAT) you finish £620 a year worse off than under standard accounting.
No. You still charge 20% VAT on your invoices and your client still reclaims 20%. The flat rate only changes how much of that VAT you hand over to HMRC. Nothing on the invoice itself changes.
You can join if your turnover excluding VAT for the next 12 months will be £150,000 or less. You must leave if, on the anniversary of joining, your VAT-inclusive turnover for the previous 12 months was more than £230,000, or if you expect your VAT-inclusive turnover in the next 30 days alone to exceed £230,000. HMRC can allow you to stay if it agrees your VAT-inclusive turnover for the next 12 months will be £191,500 or less. Note the trap: the join test is measured excluding VAT and both leave tests are measured including VAT.
Relevant goods are moveable items you buy and use in your business. They exclude all services, capital expenditure of any value, food and drink for you or your staff, vehicle costs including fuel unless you run a transport business, goods bought for resale, leasing or hire unless that is your main activity, and promotional items and gifts. That is why most one-person consultancies land on 16.5%.
How the flat rate arithmetic works
The Flat Rate Scheme replaces the ordinary output-tax-minus-input-tax sum with one percentage of your turnover. You keep charging your clients 20%, you stop reclaiming VAT on your running costs, and you pay HMRC a fixed slice instead. Whether that is a gain or a loss comes down to two numbers: the percentage you are allowed to use, and how much VAT you were reclaiming.
The formulas
Trap 1: the percentage is charged on the gross, not the net
This is the error that makes people over-estimate the scheme. A 14.5% flat rate is not 14.5% of your fee — it is 14.5% of your fee plus the VAT you added to it. Multiply by 1.20 first. In effective terms every flat rate is 20% higher than it looks: 14.5% of gross is 17.4% of net, 14% is 16.8%, 12% is 14.4%, and 16.5% is 19.8%.
Trap 2: the limited cost business test catches almost every consultant
Since the test was introduced, a business whose relevant goods spend is under 2% of its flat-rate turnover — or over 2% but under £1,000 a year — must use 16.5% whatever its sector says. Relevant goods must be goods, physically used in the business. The following do not count:
- All services — accountancy, software subscriptions, telecoms, rent, insurance, advertising, training, sub-contractors
- Capital expenditure of any value
- Food and drink for you or your staff
- Vehicle costs including fuel, unless you are in the transport business and use your own vehicle
- Goods for resale, leasing or hire, unless supplying them is your main business activity
- Promotional items and gifts
Strip those out of a typical one-person consultancy and what is left is stationery, a bit of hardware and the odd cable. That is why the honest answer for most contractors is 16.5%, and why at 16.5% the scheme is worth roughly nothing: you charge 20%, you pay over 19.8% of the same net figure, and you have given up input VAT recovery to do it.
Trap 3: the test is applied every period, not once
The limited cost test is run for each VAT return. A quarter in which you happen to buy nothing physical can put you on 16.5% for that quarter alone, even if the rest of the year clears the bar. The £1,000 annual money floor becomes £250 for a quarterly period.
Trap 4: the first-year discount runs from registration
The 1 percentage point reduction applies for the first 12 months of your VAT registration, not the first 12 months on the scheme. Join the scheme two years after registering and there is no discount to claim. It stacks with the limited cost rate, giving 15.5%.
Trap 5: joining is tested net, leaving is tested gross
You may join if turnover excluding VAT for the coming year will be £150,000 or less. Once in, you must leave if VAT-inclusive turnover for the previous 12 months exceeds £230,000 on your joining anniversary, or if you expect to exceed £230,000 in the next 30 days on its own. HMRC has discretion to let you stay if it accepts your VAT-inclusive turnover for the next 12 months will be £191,500 or less. Mixing the two bases up is a common way to leave the scheme late.
What this calculator assumes
- All your sales are standard-rated at 20% and all your VATable purchases carry VAT at 20%.
- All input VAT you enter would be recoverable in full under standard accounting.
- You give up input VAT recovery on running costs while on the scheme. The scheme has a narrow exception for certain capital assets — check VAT Notice 733 before relying on it.
- Nothing in the Flat Rate Scheme changed on 6 April 2026. The 20% standard rate, the 14.5% / 14% / 12% sector rates, the 16.5% limited cost rate, the £150,000 join test, the £230,000 leave tests, the £191,500 concession and the £1,000 / £250 goods floors are all the same as 2025/26, so the answer is identical for both tax years.
This calculator provides arithmetic calculations only and takes no account of your particular VAT position. Verify against GOV.UK: VAT Flat Rate Scheme or a qualified accountant before you join, leave or file.