A quick guide to VAT when you’re self-employed

Standard

20%

Most goods and services

Reduced rate

5%

Some goods and services (e.g., children’s car seats and home energy)

Zero rate

0%

Zero-rated goods and services (e.g., most food and children’s clothes)

Flat rate

Your expected VAT turnover is less than £150,000 (excluding VAT).

You charge the standard rate but pay a fixed VAT rate based on a percentage of your sales.

You keep the difference between what you charge customers and what you pay HMRC.

You don’t claim back VAT on your purchases other than capital assets over £2,000.

Cash accounting

Your expected VAT turnover is less than £1.35 million.

VAT is calculated on each sale.

You only pay when your customers pay you. And you only reclaim VAT once you have paid your suppliers.

Annual accounting

Your expected VAT turnover is less than £1.35 million.

You make advance VAT payments throughout the year but only submit one VAT return annually.

When you submit your return, you either pay the difference between your total advance payments and your actual VAT bill or claim a refund if it turns out you’ve overpaid.