VAT Flat Rate Calculator
Compare VAT Flat Rate Scheme vs standard VAT for UK tradespeople. See your annual saving and decide if FRS is right for your trade.
Your Details
Your total sales before VAT is added
VAT you'd reclaim under standard VAT (materials, tools, etc.)
HMRC flat rate for your trade: 9.5%
Your Results
Annual saving with FRS
£1,880
per year
Breakdown
£16,000
VAT collected from customers
£11,000
Standard VAT payable
£9,120
FRS VAT payable (9.5%)
£1,880
Annual saving
How it's calculated
FRS looks beneficial for you
Based on your inputs, the Flat Rate Scheme saves you £1,880 per year compared to standard VAT. You should consider applying — it also reduces admin by removing the need to track individual purchase VAT.
Important: Limited Cost Trader rate
From April 2017, HMRC introduced a 16.5% 'limited cost trader' rate. If your VAT-inclusive spend on goods is less than 2% of your turnover or less than £1,000 per year, you must use 16.5% instead of your trade rate. This typically affects labour-only trades such as electricians, plumbers, and plasterers who buy few materials.
The FRS rate applies to your gross (VAT-inclusive) turnover — not your net turnover. This calculator already accounts for that.
- You must be VAT-registered to join the scheme
- You can join FRS if your expected VAT taxable turnover in the next 12 months is £150,000 or less (ex-VAT)
- You leave FRS if your total business income exceeds £230,000 in a 12-month period
- Check HMRC's official FRS guidance
Frequently Asked Questions
How does the VAT Flat Rate Scheme work?▼
Under the Flat Rate Scheme (FRS), you charge your customers VAT at the normal rate (20%) but pay HMRC a lower fixed percentage of your gross (VAT-inclusive) turnover. The difference is yours to keep. In exchange, you cannot reclaim VAT on most purchases — the flat rate is designed to approximate what you would pay under standard VAT.
For example, an electrician with a 14.5% flat rate on £100,000 (ex-VAT) turnover: gross turnover is £120,000. FRS payment = £120,000 × 14.5% = £17,400. Under standard VAT, they would pay £20,000 − reclaimed VAT on purchases.
Who is the Flat Rate Scheme best suited to?▼
FRS tends to benefit tradespeople who spend relatively little on VAT-bearing materials and supplies — i.e. where most of the cost is labour. If your purchase VAT is low, you benefit more from keeping the difference between the VAT you collect and the lower FRS rate you pay.
It is less suitable for trades with high material costs (e.g. a builder buying lots of materials), because standard VAT lets you reclaim all purchase VAT, which can outweigh any FRS saving. Use this calculator to see which is better for your specific numbers.
What is the limited cost trader rate and does it affect me?▼
HMRC introduced a special 16.5% 'limited cost trader' rate in April 2017 to prevent businesses with very few goods purchases from profiting excessively under FRS. You are a limited cost trader if your VAT-inclusive spend on goods is either less than 2% of your VAT-inclusive turnover, or less than £1,000 per year.
This affects many labour-only tradespeople (electricians, plumbers, plasterers) who buy few goods. If it applies to you, enter 16.5% as your custom FRS rate above to see the true picture. At 16.5%, FRS is rarely beneficial and most limited cost traders are better off on standard VAT.
Can I switch between the Flat Rate Scheme and standard VAT?▼
Yes, you can leave the FRS at any time by writing to HMRC. You may also be removed if your turnover exceeds £230,000 in a 12-month period. You can rejoin later, but HMRC may refuse if they think you are moving between schemes purely for tax advantage.
When you leave FRS, you return to standard VAT accounting, which means tracking VAT on every purchase and sale. Many tradespeople find FRS simpler to administer even when the financial saving is modest.