Industry sector:

Driveways and patios: Working out how much VAT you will pay


Your market research will have helped you to estimate your sales income every month. Now decide what proportion of those sales might be standard rated so that you can estimate approximately how much VAT you will send off to HMRC every quarter.

For the sake of convenience, you might assume (if you think you will need to register for VAT) that the total of three months income would include VAT at 20%. However, if you anticipate that a significant proportion of your workload will be new building work (housing) or other zero rated work, you could adjust your estimate accordingly.

To calculate the amount, multiply your three months sales total (less any estimate for zero rated work) by the VAT fraction, 1/6.

This will give you the figure for output tax due. You can take away from this the VAT you will pay on your purchases of goods and services.

Now multiply your three months costs total by the VAT fraction.

This will give you the figure for input tax, which you should now deduct from the output tax figure. The balance goes in the cash flow at quarterly intervals.