Flat rate it full#

By paying 20% VAT, you can ALSO deduct any VAT you’ve paid out from the £200 before you hand it over. That’s £200 on the standard scheme, £198 on Flat Rate.īUT here’s the kicker.

Flat rate it full#

The flat rate scheme percentage is applied to all the money you receive, the full £1200, not the £1000. You can divide your total price by 6 to get the VAT inclusive 20% part, in this case, £200. (The VAT is applied to your price at 20%). If you do count as a limited cost business, you have to apply a 16.5% rate, rather than any lower percentage for your industry type. If you don’t buy goods, parts, etc to resell (if you’re a service-based business for example), it can be hard to meet these tests.

£1000 a year (if your costs are more than 2%).

You will count as a limited cost business if the goods your business buys are less than either: The main one is being a ‘Limited Cost Business’. There are other conditions, but these are the two big ones.

Expect your turnover to be under £150,000 in the next 12 months.

The good news is that you still can reclaim VAT on ‘big ticket items’ over £2000, like a new MacBook for example

Generally, you won’t reclaim VAT on your expenses (as it’s built into the flat rate percentage).

Sometimes you win on the actual mount you are handing over, compared with what you would hand over if you worked it out in full

The flat rate percentage is effectively a guess from HMRC.

As you only need apply a flat rate percentage to the money your business receives from its sales, there is far less book-keeping required.

Why is the Flat Rate Scheme good for my business? So, you are effectively charging 20% (in general) on your sales, but only handing over (for example) 12% of the total cash received from the customer. The Flat Rate Scheme’s fixed percentages are set to take into account what HMRC believe is a good amount for VAT that you might have reclaimed from your expenses. You don’t do the ‘reclaim/deduct your expenses’ part.

Hand that over to HM Revenue & Customs with your VAT return.

Add up the money you’ve had in from your customers/clients.

If you use the Flat Rate Scheme, all you do is: This can be pretty time consuming and there are lots of opportunities for costly errors, especially if you don’t like book-keeping, or constantly researching what you can/can’t claim VAT back on, You need to generally keep a detailed digital record of each transaction to work this out. Hands over the rest to HM Revenue & Customs via a VAT return.Collects VAT on the money you receive from customers/clients.When you are VAT registered, by default your business usually: A potentially cheaper way to deal with VAT.An easier life with your VAT obligations.If you are VAT registered and looking for either: