Work out your flat rate
The VAT flat rate you use usually depends on your business type. You may pay a different rate if you only spend a small amount on goods.
You get a 1% discount if you’re in your first year as a VAT-registered business.
If you spend a small amount on goods
You’re classed as a ‘limited cost business’ if your goods cost less than either:
- 2% of your turnover
- £1,000 a year (if your costs are more than 2%)
This means you pay a higher rate of 16.5%. You can calculate if you need to pay the higher rate and work out which goods count as costs.
If you are not a limited cost business, you use your business type to work out your flat rate.
Flat rates for types of business
Because of coronavirus (COVID-19) the flat rate for catering (including restaurants and takeaways), accommodation and pubs has been reduced from 15 July to 12 January 2021.
|Type of business||Current VAT flat rate (%)|
|Accountancy or book-keeping||14.5|
|Any other activity not listed elsewhere||12|
|Architect, civil and structural engineer or surveyor||14.5|
|Boarding or care of animals||12|
|Business services not listed elsewhere||12|
|Catering services including restaurants and takeaways before 15 July 2020 and after 12 January 2021||12.5|
|Catering services including restaurants and takeaways between 15 July 2020 and 12 January 2021||4.5|
|Computer and IT consultancy or data processing||14.5|
|Computer repair services||10.5|
|Entertainment or journalism||12.5|
|Estate agency or property management services||12|
|Farming or agriculture not listed elsewhere||6.5|
|Film, radio, television or video production||13|
|Forestry or fishing||10.5|
|General building or construction services*||9.5|
|Hairdressing or other beauty treatment services||13|
|Hiring or renting goods||9.5|
|Hotel or accommodation before 15 July 2020 and after 12 January 2021||10.5|
|Hotel or accommodation between 15 July 2020 and 12 January 2021||0|
|Investigation or security||12|
|Labour-only building or construction services*||14.5|
|Laundry or dry-cleaning services||12|
|Lawyer or legal services||14.5|
|Library, archive, museum or other cultural activity||9.5|
|Manufacturing fabricated metal products||10.5|
|Manufacturing not listed elsewhere||9.5|
|Manufacturing yarn, textiles or clothing||9|
|Mining or quarrying||10|
|Pubs before 15 July 2020 and after 12 January 2021||6.5|
|Pubs between 15 July 2020 and 12 January 2021||1|
|Real estate activity not listed elsewhere||14|
|Repairing personal or household goods||10|
|Retailing food, confectionery, tobacco, newspapers or children’s clothing||4|
|Retailing pharmaceuticals, medical goods, cosmetics or toiletries||8|
|Retailing not listed elsewhere||7.5|
|Retailing vehicles or fuel||6.5|
|Sport or recreation||8.5|
|Transport or storage, including couriers, freight, removals and taxis||10|
|Wholesaling agricultural products||8|
|Wholesaling not listed elsewhere||8.5|
*‘Labour-only building or construction services’ means building services where the value of the materials supplied is less than 10% of the turnover for those services. If more than this amount, the business is classed as ‘General building or construction services’.
What you pay
You calculate the tax you pay by multiplying your VAT flat rate by your ‘VAT inclusive turnover’.
Example You bill a customer for £1,000, adding VAT at 20% to make £1,200 in total.
You’re a photographer, so the VAT flat rate for your business is 11%.
Your flat rate payment will be 11% of £1,200, or £132.
VAT inclusive turnover is different from standard VAT turnover. As well as business income (such as from sales), it includes the VAT paid on that income.
Calculating 2 flat rates
The first calculation should start from day one of your accounting period to the last day of that flat rate. The second should start from the date of the new flat rate to the end of your accounting period.
Call the VAT Helpline if you have any questions about the Flat Rate Scheme.