VAT on Building Work, Explained

The three rates you will encounter

UK VAT on construction is applied at one of three rates, and the rate depends on what the work is, not on who is doing it.

VAT rates on domestic construction work. Rate | Applies to | Notes. 20% standard — Extensions, loft and garage conversions, renovations, repairs, decorating — The default for most home improvement; 5% reduced — Property empty for 2+ years; converting a house into flats or a flat into a house; changing the number of dwellings — Evidence required, usually a council empty property letter; 0% zero — Building a new dwelling from scratch; certain adaptations for disabled people — Strict conditions apply Rates reflect UK VAT rules current in 2026. HMRC guidance VAT Notice 708 is the authoritative source.

The empty property relief people miss

If a residential property has been unoccupied for two years or more immediately before work starts, most renovation and alteration work qualifies for the reduced five per cent rate. On a £150,000 refurbishment that is a saving of over £22,000.

The evidence normally accepted is a letter from the local authority's empty property officer or council tax records showing the vacancy. Obtain it before work begins, because the contractor has to charge the correct rate at the time of invoicing and cannot easily correct it afterwards.

New builds and the DIY housebuilders scheme

A contractor building a new dwelling zero-rates their labour and the materials they supply, so you should not be charged VAT on the construction at all. Professional fees from architects and engineers remain standard rated.

If you self-build or self-manage, the DIY housebuilders scheme lets you reclaim VAT on eligible materials. Claims must be submitted within six months of completion, so keep every invoice from day one. The scheme also covers conversions of non-residential buildings into dwellings.

Accessibility adaptations

Certain works for a disabled person in their own home are zero rated, including installing ramps, widening doorways for wheelchair access, and constructing or adapting a bathroom, washroom or lavatory where the adaptation is necessary because of the person's condition.

The relief is claimed by the customer signing an eligibility declaration, which the contractor keeps. It is not a means test and it does not require any specific benefit to be in payment.

Registered and unregistered contractors

A business must register for VAT once taxable turnover exceeds the threshold, £90,000 at the time of writing. A small trader below it charges no VAT, which can look twenty per cent cheaper for labour.

The saving is usually smaller than it appears, because an unregistered trader cannot reclaim VAT on materials and has to recover that cost within their price. On a large project it can also be a signal about the scale of business you are engaging, which is worth thinking about alongside insurance and guarantees.

Check whether a quote states VAT inclusive or exclusive before comparing totals · A VAT number should appear on the quote and every invoice · Never pay VAT in cash without a VAT invoice showing the number and amount · Materials you buy directly still carry VAT you cannot reclaim as a private individual

What to check before you sign

Ask three questions: is this figure inclusive or exclusive of VAT, what rate has been applied and why, and does the quote separate labour from materials. The answers put every quote on the same footing and occasionally uncover a relief that nobody had considered.

Listed buildings, conversions and the borderline cases

Alterations to listed dwellings were zero rated until 2012 and are now standard rated, which surprises many owners of period property. Repairs and maintenance have always been standard rated, listed or not.

Conversions are where the reliefs are genuinely useful. Turning a barn, office or shop into a dwelling qualifies for the reduced five per cent rate, as does converting a house into flats, or several flats back into a single house. Adding a self-contained annexe with its own entrance and facilities can also qualify where the number of dwellings changes.

These cases turn on detail, so establish the position with your accountant or with HMRC in writing before the contract is signed. The rate is set at the point of invoicing and is difficult to unwind afterwards.

Frequently asked questions

Is VAT charged on an extension?

Yes, at the standard rate. Extensions to an existing dwelling do not qualify for zero or reduced rating, however extensive the work is.

How do I prove a property has been empty for two years?

A letter from the local authority's empty property officer is the standard evidence. Council tax records, utility bills or electoral roll history can support it.

Can I reclaim VAT on a home renovation?

Not as a private individual on standard-rated work. The DIY housebuilders scheme applies only to new dwellings and qualifying conversions, not to improving a home you already live in.

Is it cheaper to use a builder who is not VAT registered?

Sometimes on labour, but they recover irrecoverable material VAT within their prices, so the gap narrows. Compare the total figure and the insurance and guarantee position, not the VAT line.