Free calculator · 2026/27 rates
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.
Ask an accountant about your figureVAT 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.
VAT element of your business costs, such as software, freelancers if VAT-registered, equipment. Standard scheme reclaims this; flat rate does not.
Spend on physical goods used in the business. Excludes services, software, stationery for own use, travel, capital items. For most service businesses this is very low.
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Standard vs Flat Rate
Under the Standard scheme you charge 20% VAT, reclaim the VAT on your costs, and pay HMRC the difference. Under the Flat Rate scheme you still charge 20% but pay HMRC a fixed percentage of your VAT-inclusive turnover instead, with no input VAT reclaim.
The Limited Cost Trader test catches most service businesses: if your goods spend is below 2% of VAT-inclusive turnover or £1,000, HMRC applies a 16.5% flat rate instead of your sector rate. At 16.5%, the Flat Rate scheme almost never wins against Standard.
Worked example: a marketing consultant with VAT-exclusive turnover of £180,000 collects £36,000 in VAT (20%), making VAT-inclusive turnover £216,000. They spend £8,000 on reclaimable input VAT and only £500 on physical goods. Under Standard VAT they pay HMRC £36,000 minus £8,000 input reclaim = £28,000. The goods spend of £500 is below both £1,000 and 2% of £216,000 (£4,320), so the Limited Cost Trader rate of 16.5% applies to the Flat Rate scheme. Flat Rate payment would be £216,000 times 16.5% = £35,640. Standard VAT saves £7,640 per year in this case. A consultant with the same turnover but higher input VAT (say £20,000 on premises and equipment) would pay only £16,000 under Standard, widening the advantage further.
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