This page shows the real VAT Flat Rate Scheme percentage for Labour-only building or construction services — 14.5% for the 2025/26 tax year (13.5% in your first year of VAT registration). The calculator above is pre-set to this category — enter your sales to see the VAT you’d pay HMRC and how it compares to standard VAT accounting.
The flat rate for labour-only building or construction services
| Rate | |
|---|---|
| HMRC flat-rate category | Labour-only building or construction services |
| Flat rate (2025/26) | 14.5% |
| First year of VAT registration (1% discount) | 13.5% |
| Limited cost business rate (if it applies) | 16.5% |
Under the Flat Rate Scheme you still charge your customers the normal 20% VAT, but you pay HMRC a flat 14.5% of your VAT-inclusive (gross) turnover and — apart from capital assets over £2,000 — you do not reclaim input VAT on purchases. You keep the difference.
What you’d pay at different turnovers
Assuming all sales are standard-rated (20% VAT) and you’d reclaim roughly 1% of net sales as input VAT under standard accounting:
| Net (ex-VAT) annual sales | VAT charged to customers (20%) | VAT-inclusive turnover | Flat-rate VAT to HMRC | Standard-accounting VAT |
|---|---|---|---|---|
| £50,000 | £10,000 | £60,000 | £8,700 | £9,500 |
| £85,000 | £17,000 | £102,000 | £14,790 | £16,150 |
| £120,000 | £24,000 | £144,000 | £20,880 | £22,800 |
On £85,000 of net sales, the Flat Rate Scheme saves you £1,360 a year versus standard VAT accounting on these example figures. Your real input VAT — especially if you buy a lot of goods — changes this, so use the calculator with your own numbers.
Is the Flat Rate Scheme worth it for labour-only building or construction services?
The flat rate helps most when you have low input VAT (few VATable purchases) — the gap between the 20% you charge and the 14.5% you pay HMRC stays in the business. If you buy a lot of standard-rated goods or services, standard accounting (reclaiming that input VAT) can beat the flat rate. Watch the limited cost business rule: if your goods spend is under 2% of VAT-inclusive turnover (or under £1,000 a year) you must use the 16.5% rate regardless of category — tick that box in the calculator to test it.
Eligibility and limits
- Join: VAT taxable turnover £150,000 or less (excluding VAT) expected in the next 12 months, and you must be VAT-registered.
- Leave: you must leave once your total income for the year is more than £230,000.
- First year: a 1% discount on the flat rate for your first year as a VAT-registered business.
- Registration threshold (context): you must register for VAT once taxable turnover passes £90,000 in any 12 months (threshold effective 2024-04-01).
UK VAT rates (for reference)
| Rate | Percentage | Applies to (examples) |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced | 5% | Domestic fuel and power, children’s car seats |
| Zero | 0% | Most food, books, children’s clothes |
Assumptions
This is a planning estimate. It assumes all your sales are standard-rated at 20%, and the comparison uses an illustrative input-VAT figure of about 1% of net sales — your real input VAT may be very different. It does not handle mixed-rate sales, the EU, second-hand margin schemes, or capital-asset reclaims. Your accountant and HMRC are the authority.
Sources & as-of
- VAT Flat Rate Scheme category percentages, 1% first-year discount, 16.5% limited cost rate: GOV.UK — VAT Flat Rate Scheme: work out your flat rate.
- £150,000 join limit, £230,000 leave limit, limited cost business definition: GOV.UK — VAT Flat Rate Scheme overview and VAT Notice 733.
- Standard/reduced/zero VAT rates: GOV.UK — VAT rates.
- £90,000 registration threshold: GOV.UK — Register for VAT.
- Tax year 2025/26. Page data as-of 2026-06-18. Rates can change at fiscal events — confirm current figures on GOV.UK.