VAT Flat Rate Scheme Saving Calculator
Under the FRS, you charge customers 20% VAT but pay HMRC a fixed % of gross turnover. Type turnover, sector rate, and input VAT to see whether FRS or the standard scheme saves you more.
The Flat Rate Scheme simplifies VAT for small businesses (turnover under £150k/yr ex VAT). You charge 20% VAT to customers as normal but pay HMRC a sector-specific lower rate on gross (VAT-inclusive) sales.
| Sector | Flat rate |
|---|---|
| Limited cost trader (most office-only services) | 16.5% |
| IT consultancy | 14.5% |
| Management consultants | 14% |
| Accountancy & bookkeeping | 14.5% |
| Bars / pubs | 6.5% |
| Hairdressing | 13% |
| Photography | 11% |
1% discount in the first year of registration. Limited cost trader rate (16.5%) often makes FRS unattractive for low-overhead service businesses.
Worked examples
IT consultant: £100k revenue ex-VAT → £120k gross. FRS payment to HMRC: £120k × 14.5% = £17,400.
vs standard scheme: £20k VAT collected − reclaimed input VAT (~£500 typical) = £19,500 to HMRC. FRS saves £2,100/yr.
Sources:
HMRC Flat Rate Scheme
· retrieved 2026-05-12.
Frequently asked questions
Is FRS always better?
No — if you have significant input VAT (purchases of stock or VAT-able services), the standard scheme is usually better.
What is a limited cost trader?
Spending less than 2% of turnover on goods (or under £1k/yr). Most pure-service businesses qualify, forced into the 16.5% rate which often loses the FRS benefit.
Can I leave FRS?
Yes — effective from the start of the next VAT period. Speak to your accountant first.