VAT Flat Rate Scheme for Tradespeople: Is It Worth It?
Written by Tom Ellis · Senior Trades Editor
Last updated: 9 November 2026
Quick Answer
The Flat Rate Scheme (FRS) lets you pay HMRC a fixed percentage of your gross (VAT-inclusive) turnover, instead of tracking every penny of VAT in and out. The rate depends on your trade: builders and general construction pay 9.5%; electricians and plumbers pay 14.5%. It simplifies bookkeeping and can save you money if your input VAT (VAT on materials and expenses) is low. Labour-only contractors typically benefit most.
Note: this guide covers the Flat Rate Scheme specifically. For how standard VAT works as a tradesperson — registration, charging 20%, and reclaiming input tax — see our VAT guide for tradespeople.
How the flat rate scheme works
Under standard VAT, you charge 20% VAT on your invoices, reclaim VAT you've paid on purchases, and pay HMRC the difference each quarter. That means keeping detailed records of every VAT receipt.
Under the Flat Rate Scheme, you still charge your customers 20% VAT as normal. But instead of reclaiming input VAT separately, you simply pay HMRC a flat percentage of your gross (VAT-inclusive) turnover. The difference between the 20% you collected and the flat rate you pay is yours to keep.
Example: you invoice £10,000 + VAT = £12,000 gross. Under FRS at 9.5%, you pay HMRC £1,140 (9.5% × £12,000). You keep the £1,200 VAT you charged minus the £1,140 you pay HMRC = £60 extra. Plus you've saved time on bookkeeping.
The catch: you can't reclaim VAT on individual purchases (except for certain capital goods over £2,000). So if you spend a lot on VAT-able materials, FRS may cost you more than standard VAT.
FRS rates by trade
| Trade / Category | FRS rate |
|---|---|
| General building or construction services | 9.5% |
| Electrical or plumbing services | 14.5% |
| Heating or ventilation engineering | 14.5% |
| Civil and structural engineering | 14.5% |
| Plastering | 14.5% |
| Carpentry and joinery | 9.5% |
| Roofing services | 14.5% |
| Painting and decorating | 9.5% |
| Landscaping and horticulture | 9.5% |
| Limited cost trader (any sector) | 16.5% |
Rates correct as of November 2026. HMRC's full list is in VAT Notice 733. If you're unsure which category applies to your work, check with HMRC or an accountant.
A worked example: builder on standard vs FRS
A self-employed builder invoices £60,000 net per year. They spend £8,000 on VAT-able materials (20% VAT = £1,600 input VAT to reclaim).
| Standard VAT | Flat Rate (9.5%) | |
|---|---|---|
| VAT charged to customers | £12,000 | £12,000 |
| Input VAT reclaimed on purchases | £1,600 | None (except capital goods) |
| VAT paid to HMRC | £10,400 | £6,840 (9.5% × £72,000 gross) |
| Net VAT position | Pay £10,400 | Pay £6,840 — saving £3,560 |
In this example FRS wins by £3,560 — because the builder is relatively labour-heavy. If the same builder spent £25,000 on VAT-able materials (£5,000 input VAT), standard VAT would come out cheaper. Run the numbers for your own situation before switching.
The limited cost trader rule — watch out
HMRC introduced the Limited Cost Trader rule in 2017 to prevent businesses with very low costs from gaining a tax advantage through FRS. If the goods you buy for your business are less than 2% of your gross turnover (or under £1,000 per year), you must use the 16.5% rate instead of your trade rate.
Note: “goods” means physical items — materials, tools, consumables. It excludes services (fuel, software, phone contracts, subcontractors). Pure labour-only traders often fall into this category, which makes FRS less attractive.
At 16.5%, FRS rarely saves money. Check HMRC's limited cost trader test before joining FRS.
When FRS is worth it and when it isn't
| FRS tends to be better when... | Standard VAT tends to be better when... |
|---|---|
| You do mostly labour (low material costs) | You buy lots of VAT-rated materials |
| You want simpler bookkeeping | You make large one-off purchases (plant, tools over £2k) |
| Your trade rate is 9.5% (builders, decorators) | You're a limited cost trader (rate forced to 16.5%) |
| Your turnover is under £150,000 | You regularly reclaim large VAT refunds |
How to join or leave the FRS
To join:Apply online through your HMRC VAT account, or call the VAT helpline. You can join from the date you registered for VAT, or any later date. You'll receive a letter confirming your flat rate percentage and start date.
To leave:You can voluntarily leave at any time — write to HMRC (or use your online account) and they'll confirm your exit date. You must leave if your turnover exceeds £230,000 (the FRS exit threshold).
It's worth reviewing your FRS position annually. As your business grows or your mix of labour vs materials changes, the scheme can tip from saving you money to costing you more.
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