VAT Flat Rate Scheme Calculator for Financial services
For VAT-registered IFAs, mortgage brokers, financial planners, and wealth advisers — note most regulated advice is VAT-exempt.
Why this matters for financial services
Financial services pay 13.5% under FRS, but the bigger issue is whether your supplies are VAT-able at all: regulated investment advice and intermediation are typically VAT-exempt, which removes them from your VAT-inclusive turnover. FRS only makes sense if a meaningful portion of your fees are standard-rated (e.g. lifestyle / cashflow planning fees not tied to a regulated transaction).
A mortgage broker with £80,000 in standard-rated procuration fees might reclaim £600 of input VAT under Standard. FRS at 13.5% requires input VAT under 3.8% of net to win.
Limited Cost Trader trap
High risk — most caughtCRM, planning software, FCA fees, PII, and research subscriptions are services. Goods are typically minimal in a financial-services practice, so most independent advisers trip the LCT 16.5% rate when they join FRS.
Calculator (pre-selected for financial services)
HMRC publishes 51 sector rates from 4% (food retail) to 14.5% (IT, accountancy, legal). Pick the one that best matches your main business activity.
Joining threshold: £150,000.
The 20% VAT on your business purchases (software, equipment, professional fees, stock). Leave blank or use 0 for service businesses with low purchases.
Goods only — excludes services, capital items, food/drink for staff, fuel (except transport sector). If this is below 2% of your gross turnover OR below £1,000/year, your rate becomes 16.5%.
Financial services
16.5%
Industry base rate
13.5%
Limited Cost Trader
16.5% (override)
First-year discount
Not applied
Standard scheme — VAT to HMRC
£11,500.00
£12,000.00 output − £500.00 input
FRS — VAT to HMRC
£11,880.00
£72,000 gross × 16.5%
Annual difference
-£380.00
Standard pays HMRC less
Stay on the Standard scheme. You reclaim more input VAT than FRS would save you — switching would cost £380.00 per year.
Break-even: at input VAT of £120 (0.2% of net turnover), the two schemes pay HMRC the same. Below that, FRS wins; above, Standard wins.
Worked example: £60,000 net turnover
Output VAT charged
£12,000
£60,000 × 20% (what customers pay you in VAT)
FRS payable to HMRC
£9,720
£72,000 gross × 13.5%
Break-even input VAT
£2,280
3.8% of £60,000 net — below this, FRS wins
In your first year of VAT registration, the 1% discount drops your effective rate from 13.5% to 12.5%, raising the break-even threshold to 5.0% of net turnover. Use the calculator above with your actual turnover and input VAT figures.
Frequently asked questions
My fees are mostly VAT-exempt. Should I bother with FRS at all?
Probably not. If 80%+ of your fees are exempt regulated advice or intermediation, your VAT-inclusive turnover is small and the FRS calculation barely moves the needle. Standard scheme with simple input VAT tracking on the small VAT-able slice is usually less hassle.
How does FRS interact with the £85,000 financial-services-specific exempt threshold?
There is no special FRS treatment for financial services exemption. The standard FRS rules apply: £150,000 joining threshold (excl VAT) and £230,000 leaving threshold (incl VAT). Your exempt income is excluded from the joining test.
What is the FRS rate for financial services?
HMRC publishes a flat rate of 13.5% for "Financial services" under the VAT Flat Rate Scheme. In your first year of VAT registration, the 1% discount drops it to 12.5%. If your business is classed as a Limited Cost Trader (goods spend below 2% of VAT-inclusive turnover or below £1,000/year), the rate becomes 16.5% regardless of sector.
What is the break-even input VAT for financial services on FRS?
At a 13.5% FRS rate, the Standard scheme pays HMRC the same as FRS when input VAT equals 3.8% of net turnover. Below that threshold, FRS pays HMRC less; above it, Standard wins. For a £60,000 net-turnover business, break-even input VAT is £2,280.