The Flat Rate VAT Scheme for tradespeople: rates and whether it's worth it

How it works

Charge VAT as normal. Then pay HMRC your flat rate percentage of your total takings including VAT. You don't reclaim VAT on what you buy, apart from single capital items costing £2,000 or more including VAT.

Rates for trades

• Labour-only building or construction services: 14.5%
• General building or construction services (where you supply materials): 9.5%
• Repairing personal or household goods: 10%
• Any other activity not listed: 12%
• Limited cost trader: 16.5%, whatever your trade
• First year VAT registered: 1% off your rate

The limited cost trader rule

If you spend less than 2% of your takings on goods, or less than £1,000 a year, you must use 16.5%. Goods means things like materials and parts; it doesn't include fuel, food, vans or equipment. A labour-only trade can easily fall into this.

Joining and leaving

• You can join if your taxable turnover is £150,000 or less a year, before VAT
• You must leave if your turnover goes over £230,000

Is it worth it?

It tends to suit trades with few VAT-able costs. If you buy a lot of materials, standard VAT accounting, where you reclaim the VAT on them, is often better. Work it out both ways on a typical quarter before you switch.

Construction and the reverse charge

Work under the domestic reverse charge, for VAT-registered builders under CIS, is left out of your flat rate turnover. If most of your work is reverse charge, the scheme may not be worth it: ask your accountant.