What Types Of VAT Are There?
Are you thinking about registering for VAT but confused? Or maybe you’re unsure about what you need to do? If so, we’ve prepared a very simple overview guide to VAT for you.
There are two types of VAT
There are two main types of VAT:
· Standard VAT
· Flat rate VAT
If your business turns over more than £82,000 a year, you need to register for VAT. (You can also choose to register for VAT if your turnover is less.)
If you’re VAT registered, you must charge VAT on any goods or services you sell. You can also usually reclaim any VAT you pay.
The standard rate for VAT on goods and services it applies to is currently 20%.
Flat rate VAT
If your VAT turnover is less than £150,000 you can choose to join the flat rate VAT scheme instead.
Under the flat rate VAT scheme, you charge VAT on any goods or services you sell. Unlike standard VAT you can’t reclaim any VAT you pay. Instead, you a fixed % of the VAT you have charged back to the HMRC.
So for example, you charge your customers 20% VAT for your product or service, but may only pay back 12% to HMRC.
It’s worth speaking to your accountant to see whether the flat rate scheme is right for you, and how it can work for you.