VAT Flat Rate vs Standard 2027 Calculator UK
Compare VAT Flat Rate Scheme vs Standard for 2026/27. Find your break-even threshold and check if 'limited cost trader' 16.5% applies.
| Output VAT (20%) charged | — |
| FRS rate applied | — |
| 1% first-year discount | Only year 1 of FRS |
| Reclaim under Standard | — |
| Saving / cost vs Standard | — |
What Is the VAT Flat Rate Scheme?
The Flat Rate Scheme (FRS) lets small businesses pay HMRC a fixed percentage of VAT-inclusive turnover instead of accounting for output VAT minus input VAT. It simplifies bookkeeping and can save money when your input VAT is low. Eligibility: VAT-taxable turnover under £150,000 at scheme entry. You leave when turnover exceeds £230,000 (including VAT). Capital goods purchased over £2,000 incl. VAT can still be reclaimed separately.
How the 2026/27 Rules Work
VAT registration threshold rose to £90,000 on 1 April 2024 (deregistration £88,000). FRS sector rates remained unchanged for 2026/27. Year-one FRS users get a 1% discount on their sector rate for the first 12 months. The Limited Cost Trader (LCT) rule from April 2017 forces a 16.5% rate on businesses with goods spend <2% of turnover or <£1,000/year — designed to remove the FRS benefit for labour-only contractors.
How to Choose
FRS usually wins for low-overhead service businesses (IT contractors, consultants, copywriters) unless caught by LCT. Standard wins for trade-heavy businesses (retailers, manufacturers) and anyone with high input VAT. The break-even formula: FRS wins when (output VAT × FRS rate / 120) is less than (output VAT − input VAT). Recalculate quarterly — your mix can shift.
Source and Disclaimer
Rates sourced from gov.uk VAT Notice 733 (Flat Rate Scheme) as of May 2026. This is an educational calculator and is not tax advice. Consult a chartered accountant before choosing or switching VAT schemes. Last updated: May 2026.
Source: gov.uk/guidance/vat-flat-rate-scheme