VAT and cashflow
VAT schemes explained: which one suits your business?
Once you are VAT registered, the scheme you use changes both how much VAT you pay and when you pay it. The right choice depends on your margins, your costs and your customers. Here is a plain-English overview of the main options.
Standard VAT accounting
Under standard accounting you charge VAT on your sales, reclaim VAT on your purchases, and pay the difference each quarter. It suits most businesses with significant VAT on their costs, because the reclaim genuinely benefits you.
The flat rate scheme
The flat rate scheme simplifies things by applying a fixed percentage to your turnover, rather than tracking VAT on every purchase. It can be simpler and occasionally more efficient for businesses with few costs, but it is not always cheaper, so it needs comparing against the standard scheme for your numbers.
Cash accounting
Cash accounting lets you account for VAT when you are actually paid, rather than when you invoice. For businesses that wait a long time to get paid, this can be a real help to cashflow, because you are not paying VAT over to HMRC before the customer has paid you.
Want this applied to your own numbers?
Book a free 30-minute call and we will tell you, honestly, where your biggest tax wins are.
Choosing well
The best scheme is the one that fits how you actually trade, and that can change as the business grows. We compare the options against your real figures rather than assuming one is always best.
Every business is different, and the right move depends on your full financial picture. Book a free 30-minute call and we will tell you, honestly, where your biggest tax wins are.
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