Journalism has a flat rate of 12.5%. (as at Dec11)
Emily Jones is a freelance journalist in Newbury and has billed £24,000 in gross sales (£20,000+VAT at 20%) between her VAT period of October to December 2011. Total business expenses that she incurred during the period was £1,500, all of the expenses incurred VAT (£1,250 + VAT at 20%).
If Emily used the standard VAT scheme the VAT she would pay to HMRC would be as follows:
- £4,000 sales VAT
- Less (£250) purchase VAT
- £3,750 VAT to pay to HMRC
If Emily used the Flat Rate VAT Scheme, the VAT due would be calculated as follows:
- Journalism has a flat rate of 12.5%. (as at Dec11)
- Gross sales £24,000 multiplied by 12.5%
- £3,000 VAT to pay to HMRC
This results in Emily in paying £750 less to HMRC when she pays her VAT bill, which therefore increases her business profits.