Guide to Freelancing - PCG

You can deduct one percent off the flat rate that you use for your first year of VAT registration. On
the first anniversary of your VAT registration, the rate will revert to the standard percentage.
To fill out the VAT return you need to know your total sales and VAT amounts for the quarter. This
can be calculated in one of two ways:
a) A cash basis: add up the amounts actually received from clients in the quarter.
b) An invoice basis: add up the amounts invoiced to clients in the quarter.
To register for the Flat Rate Scheme, ask your accountant or visit:
http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#10
IN A NUTSHELL: VAT
Freelancers earning over £73,000 (VAT threshold) have to register for a VAT
number and add VAT to invoices
UK VAT is currently 20%
The flat rate scheme is generally the best option for freelancers earning up to
£150,000. It is relatively hassle free and can result in savings (these are treated
as income for the purposes of calculating your corporation tax or personal tax
liability)
You can account for VAT based on the time you invoice or the time you are paid.
Copyright PCG September 2011 Guide to Freelancing Version 7.0 49