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Which tax code should I use? - from 1 January 2021 (UK only)

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Summary

This guide explains what tax code to use for sales of an asset when using the Flat Rate VAT schemes.

Description

Based on the information you've given us, we recommend you use one of the following tax codes:

VAT was originally recovered when purchased

Under the Flat Rate Scheme, the purchase of capital assets costing more than £2,000 including VAT, where VAT is recovered, should be recorded with a T25 tax code. When such assets are then sold, full VAT should be declared and therefore the T25 tax code should be used on the sale as well.

Which tax code to use T25
How this affects your VAT Return

Flat rate schemes:

The tax amount appears in box 1.
The net amount appears in box 6.

Standard and VCA schemes:

You should not use this tax code on Standard or VCA VAT schemes.

VAT was not originally recovered when purchased

If VAT wasn't recovered on the purchase then the normal tax codes apply, for example T1 for a standard rated purchase and sale.

Standard rated - 20%

Which tax code to use T1
How this affects your VAT Return

Flat rate schemes:

The flat rate percentage of the gross amount appears in box 1.
The gross amount appears in box 6.

Reduced rate -  5%

Which tax code to use T5
How this affects your VAT Return

Flat rate schemes:

The flat rate percentage of the gross amount appears in box 1.
The gross amount appears in box 6.

Zero rated

Which tax code to use T0
How this affects your VAT Return

Flat rate schemes:

The flat rate percentage of the gross amount appears in box 1.
The gross amount appears in box 6.

Exempt

Which tax code to use T2
How this affects your VAT Return

Flat rate schemes:

The flat rate percentage of the gross amount appears in box 1.
The gross amount appears in box 6.

TIP: Unsure which rate to apply? Read more >

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This article offers general guidance only. While accurate at the time of publication, it may not suit your specific needs. We make no express or implied warranties. For tailored advice, consult a professional. For VAT, customs, or duties queries, contact HMRC on 0300 200 3700 or visit www.hmrc.gov.uk. We accept no liability for any loss from using this content. VAT or tax codes shown reflect default software settings and may differ in your setup.