When you registered to become VAT registered you will have the option to choose the Flat Rate Scheme.  It is worth considering whether this is a suitable scheme for your business because their are benefits to using it in your first year of VAT registration.

The flat rate VAT scheme allows you to pay a % of your business income with the % varying according to the type of business you have.  The benefit of using this scheme in your first year of VAT registration is that you can reduce that % by 1% for the first 12 months.

You can choose to use the flat rate VAT scheme at any time but you have to apply to HMRC to use the scheme and they have to approve you using it.  You can apply if your turnover is expected to be up to £150,000, including VAT, over the next 12 months.  However you do have to stop using it and change to standard or cash accounting when your turnover reaches £230,000 including VAT, over a 12 month period.

The advantage of using the flat rate scheme is that, whilst you continue to charge your customers 20% VAT you will only pay the fixed % given for your business type.  No VAT can be recovered on purchases unless the value of a single asset purchase is over £2,000.  This scheme reduces record keeping as only sales need to be reported.  However receipts will still be needed to identify purchases, even though VAT is not claimed.

The flat rate % can vary between 4% and 14.5% of the VAT inclusive sale depending on your business type.  You kind review the flat rates you can apply for using this link to the flat rates on HMRC website. 

If your purchases which directly relate to your sales are less than 2% of your turnover or are less than £1,000 per year you will pay a standard rate of 16.5% VAT.   If this applies to you it would be worth calculating whether the flat rate scheme or the standard or cash accounting schemes will be better for you.  Either of the latter two may be more beneficial if a large amount of your purchases include VAT.

If you do use the Flat Rate Scheme you can choose to report on either the accrual or cash basis.  The choice will be dependent solely on how quickly your customers pay you because you won't be claiming VAT back on any purchases.