What is Flat Rate VAT?

Businesses on the Flat Rate VAT Scheme pay a fixed rate of VAT to HMRC. This is different to other schemes that calculate your VAT return based on the VAT you’ve charged your customers and the VAT you’ve paid out yourself.

Usually, the amount of VAT you pay or claim back from HMRC is calculated using the amount of VAT you have paid on your own purchases and the total VAT you have charged your customers.

With Flat Rate VAT you simply pay a percentage of your flat rate turnover (your income including VAT). The flat rate you use depends what type of business you have, currently ranging from 4% for certain retail items to 14.5% on computer and IT consultancy services.

Under the Flat Rate Scheme you keep any difference between the VAT you charge your customers and the flat rate you pay HMRC. Unfortunately you can’t reclaim the VAT you’ve paid out, except on capital assets over £2,000.

Registering for Flat Rate VAT

To be eligible for Flat Rate VAT your turnover must be less than £150,000 (excluding VAT). Other schemes are available but each one has different terms and different thresholds, so you should seek professional advice before registering. If you are a Numberworx customer, your dedicated bookkeeper will be familiar with your business and circumstances, so he or she will be in a good position to help. Remember our service includes free, unlimited advice by phone, email or online chat so you can ask any questions, any time.

Ask away!

Even if you aren’t using Numberworx, we will do our best to answer your questions on the different VAT schemes available.