Small Business Accountants

What flat rate VAT percentage do I apply for multiple business sectors?

On the VAT Flat Rate Scheme, if your business spans more than one trade sector, HMRC requires you to apply the flat rate percentage for whichever sector accounts for the largest share of your VAT-inclusive turnover. That single rate then applies to your total turnover, not just the income from that sector. You must review your sector classification each year to keep it accurate.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 16 Apr 2026 1

Flat Rate VAT Percentage for Multiple Business Sectors - GoForma Tax Guides | UK Accountants & Tax Advisors

Key takeaways

If your business covers more than one trade sector, use the flat rate percentage for the sector that makes up the largest proportion of your total VAT-inclusive turnover.
Where one sector accounts for more than 50% of your turnover, that sector's rate applies to your entire VAT-inclusive turnover, not just income from that activity.
If no single sector exceeds 50%, you still use the rate for the sector with the highest share; HMRC does not blend or average rates across sectors.
You must review your trade sector classification every year; if your business mix shifts and a different sector becomes dominant, your flat rate percentage must change.
New VAT-registered businesses using the Flat Rate Scheme benefit from a 1% discount on their rate during their first year of VAT registration, as confirmed in VAT Notice 733.

If your business can be classified under more than one sector because you provide different types of services or products, you’ll then use the percentage that applies to the majority of your services or sales, and apply that to your total sales.

Let’s say you’re running a hair salon-cum-restaurant business. If 70% of your sales is derived from providing hair and beauty treatments, you’ll then apply a VAT flat rate of 13% (for hairdressing and beauty treatment services) to your total turnover.

Frequently asked questions

How do I decide which flat rate percentage to use if I work across multiple sectors?

HMRC requires you to identify the sector that makes up the largest proportion of your total VAT-inclusive turnover and apply that sector's flat rate to your entire turnover. For example, if 70% of your income comes from hairdressing and 30% from catering, you apply the 13% hairdressing rate to all your sales. The rule is set out in HMRC VAT Notice 733 and applies regardless of how many sectors your business spans.

What counts as the 'majority' of my turnover under the Flat Rate Scheme?

HMRC uses the phrase 'largest proportion' rather than a strict majority threshold. In practice, if one sector makes up more than 50% of your VAT-inclusive turnover, that sector is dominant and its rate applies. If no single sector exceeds 50%, you use the rate for whichever sector has the highest share. HMRC does not permit averaging or blending of flat rates across sectors, so one rate always applies to the full turnover figure.

Can I split my turnover and apply different flat rates to each part of my business?

No. The Flat Rate Scheme requires a single percentage to be applied to your total VAT-inclusive turnover. You cannot apportion turnover and use a lower rate for one activity and a higher rate for another. HMRC identifies this as a common error. You must select one sector based on where the majority of your turnover falls, and that rate then covers all income for the VAT period.

How often do I need to review which sector I am in?

HMRC expects you to review your trade sector classification at least once a year. If your business mix changes significantly during the year, for example because you add a new service line that becomes your primary revenue stream, you should reassess your sector promptly and update your flat rate percentage from the next VAT period. Failing to use the correct rate can result in penalties or a VAT under-declaration that HMRC may correct on inspection.

Does the limited cost trader rate apply when I operate across multiple sectors?

Yes, if applicable. The limited cost trader rate of 16.5% overrides any trade sector rate if your spending on goods is less than 2% of your VAT-inclusive turnover in the period, or less than 1,000 pounds in a year. This rule applies regardless of how many sectors your business covers. You must check the limited cost trader test every VAT return period, as it can apply even if you were not a limited cost trader in the previous period.

What is the flat rate percentage for hairdressing and beauty services in 2025/26?

HMRC sets the flat rate for hairdressing and other beauty treatments at 13% for 2025/26 under VAT Notice 733. This is the rate you apply to your total VAT-inclusive turnover if hairdressing or beauty services make up the largest share of your business income. New registrants using the Flat Rate Scheme in their first year of VAT registration are entitled to a 1% reduction, bringing the effective rate to 12% for that period.

Who is eligible to use the VAT Flat Rate Scheme?

The Flat Rate Scheme is open to VAT-registered businesses whose taxable turnover, excluding VAT, is 150,000 pounds or less per year. Once on the scheme, you can stay until your VAT-inclusive annual turnover exceeds 230,000 pounds. Businesses that are part of a VAT group, or that have been on the Flat Rate Scheme in the previous 12 months, may face additional restrictions. Full eligibility conditions are set out in HMRC VAT Notice 733.

Where can I find the full list of HMRC flat rate percentages by sector?

The complete table of flat rate percentages for each trade sector is published by HMRC in VAT Notice 733, which is available on gov.uk. The notice lists over 50 categories ranging from 4% for retailing food, confectionery, tobacco, newspapers or children's clothing to 14.5% for labour-only building and construction services. If your trade does not fit neatly into any listed category, HMRC guidance advises you to use the rate for the activity that most closely matches your main business.

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