A complete guide to the HMRC VAT Flat Rate Scheme — how it works, sector percentage rates, who benefits, and how to calculate your VAT payment.
The HMRC Flat Rate Scheme (FRS) is a simplified VAT accounting method for small UK businesses. Instead of calculating the difference between VAT charged to customers and VAT paid on purchases, you simply pay a fixed percentage of your gross (VAT-inclusive) turnover to HMRC.
Your business can join the FRS if your taxable turnover is £150,000 or less (excluding VAT) in the next 12 months. You must also be VAT-registered.
You charge customers at the standard 20% VAT rate as normal. But you pay HMRC a lower, fixed percentage of your gross turnover — keeping the difference as additional income.
FRS VAT Payment Formula
VAT due = Gross turnover × FRS rate
e.g. £12,000 gross × 14.5% = £1,740 to HMRC
Your saving vs standard VAT
Saving = £2,000 − £1,740 = £260
You collected £2,000 VAT, pay £1,740
Full rates available at: HMRC Flat Rate Scheme percentages (GOV.UK)
Calculate your Flat Rate Scheme VAT payment instantly.
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