Should the self-employed leave the VAT Flat Rate Scheme?

November 27th, 2023

The VAT Flat Rate Scheme is a simplified scheme for smaller businesses, but it may not be the best option for all self-employed people.

Under the flat rate scheme, businesses pay a fixed percentage of their VAT-inclusive turnover to HMRC instead of the difference between the VAT they charge and the VAT they incur. The flat rate percentage depends on the business sector within which the trader operates.

The following table shows the HMRC set percentages for VAT under the flat rate scheme:

Business sector Flat rate percentage
Limited cost businesses 16.5%
Construction businesses 16.5%
Agricultural, horticultural or forestry businesses 12.5%
Retail businesses 7.5%
Hotel or holiday accommodation businesses 5.5%
Other businesses 14.5%

When should self-employed people leave the flat rate scheme?

There are a few reasons why self-employed people may want to consider leaving the flat rate scheme:


If you are self-employed and you are considering leaving the VAT Flat Rate Scheme, you should speak to an accountant or tax advisor to get advice on the best course of action for your specific circumstances.