VAT Scheme Comparator
Picking the wrong VAT scheme costs four-figure sums a year for most service businesses. Run your turnover and input VAT through the comparator to see whether the Flat Rate Scheme beats Standard VAT for you, and whether the Limited Cost Trader rules would force you onto the 16.5% sector rate anyway.
Your VAT position
VAT element of your business costs (software, freelancers if VAT-registered, equipment). Standard scheme reclaims this; flat rate doesn't.
Spend on physical goods used in business. Excludes services, software, stationery for own use, travel, capital items. For a service-based business, this is usually very low.
Best scheme for you
Standard
Saves £7,640 per year vs the other scheme.
Standard VAT scheme
- VAT collected (20%)
- £36,000
- VAT reclaimed on inputs
- -£8,000
- Net payable to HMRC
- £28,000
Reclaim VAT on costs. Best when your input VAT is meaningful (£8k+ per year).
Flat Rate scheme
Rate applied: 16.5% (Limited Cost Trader)
- VAT-inclusive turnover
- £216,000
- Flat payment @ 16.5%
- £35,640
- Difference vs collected VAT
- +£360
Limited Cost Trader rate (16.5%) applies because your goods spend is below 2% of turnover or £1,000. Rarely beneficial for service businesses.
Cash Accounting (consider separately)
Cash Accounting can be combined with either scheme above. It means you account for VAT when you receive payment, not when you raise an invoice. Cash-flow positive if you have long payment terms with clients (60+ days). Available if turnover is under £1.35M.
Voluntary registration is the underrated lever
Most owners think about VAT only when they cross £90,000 of turnover. The smarter ones model voluntary registration earlier, recover input VAT on capital purchases, and switch schemes deliberately as the business changes shape. We do that modelling, plus the registration, scheme switches, MTD setup and quarterly returns, on a fixed monthly fee.
Talk to us about VAT