VAT on building work: when it's 20%, 5% or zero-rated

↑ Part of the Tax & VAT series · The UK Trade's VAT & CIS Guide

Most building work in the UK carries VAT at the standard 20%. Certain conversions, and renovations of a home that has stood empty for 2 years or more, drop to the reduced rate of 5%. Building a genuinely new dwelling from scratch is zero-rated at 0%. The rate is decided by the work itself, not by your trade and not by the size of the job, and only in a few narrow cases by who is paying. Get it wrong in the customer's favour and HMRC collects the shortfall from you, not from them.

This is a detail page under our main VAT & CIS guide, which covers registration and the Domestic Reverse Charge first. Everything below assumes you're VAT registered; if you aren't, you don't charge VAT at all, whatever the work.

Part 1What actually decides the rate

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There is no "builder's rate" of VAT. HMRC looks at the nature of the supply: what is being built or altered, to what kind of building, and whether the conditions attached to a cheaper rate are all met. Two vans on the same street can correctly charge different rates on the same day.

Three things follow from that, and they catch people out:

• Your trade is irrelevant. A plumber, a joiner and a groundworker on the same zero-rated new build all charge 0%.
• Who pays rarely changes the rate, but it can. A homeowner and a developer are charged the rate the work attracts. The exceptions are narrow: a main contractor converting a non-residential building into homes for a registered social housing provider can zero-rate work that would be 5% for anyone else, and the cheaper rates for care homes and charitable buildings depend on the customer's certificate. (Who pays also decides whether the reverse charge applies, which is a separate question.)
• The cheaper rates are conditional. They are not discounts you can offer. Either the job meets the conditions and you have the evidence, or the rate is 20%.

Part 2The standard rate: most of what most trades do

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Charge 20% unless you can point to the specific rule that says otherwise. That covers repairs, maintenance, redecoration, replacing a kitchen or bathroom, rewires, boiler swaps, and almost all commercial and industrial work.

It also covers two jobs that people expect to be cheaper, and aren't:

• Extensions and alterations to an existing house. Building a new house is zero-rated, but adding to one that already exists is standard-rated. The same brickwork, a different rate, because the building already stood there.
• Loft and garage conversions. More space in the same single dwelling is an alteration, so 20%. The reduced rate turns on changing the number of dwellings, not the number of rooms.

Annexes are the classic argument. A granny annexe is normally 20%, because to count as a separate dwelling it has to be genuinely self-contained, have no direct internal door into the main house, and be capable of separate use or sale without a planning restriction saying otherwise. Most annexes fail at least one of those tests.

Part 3When the job drops to 5%

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Four situations bring the reduced rate in. Each has conditions, and each needs paperwork you can produce two years later.

• A change in the number of dwellings. A house split into flats, several flats knocked back into one house, or a self-contained unit created or removed. What matters is that the count changes.
• Non-residential into residential. A barn, an office, a shop, a pub, the empty floor above a shop, all converted into a home or homes.
• A home empty for 2 years or more. The property must have been unlived-in for the whole two years immediately before the work starts. This one covers ordinary renovation and alteration work, which is the widest reach the 5% rate has.
• Conversion into a care home or similar. Residential converted for a "relevant residential purpose" qualifies, but your customer has to give you a certificate confirming the use before you invoice.

Two related rates worth knowing, because they come up on domestic jobs. Energy-saving materials installed in a home, such as insulation, solar panels and heat pumps, are zero-rated until 31 March 2027, then go back to 5% from 1 April 2027. And installing mobility aids in the home of someone aged 60 or over, such as grab rails, a ramp, a stairlift, a bath lift, a shower with a built-in seat or a walk-in bath with a sealable door, is 5%.

If a home has stood empty for 10 years or more, different rules again can apply, because at that point it is treated as though it was never lived in. That corner is genuinely specialist and the answer depends on who is selling what to whom. Get advice on it rather than assuming either rate.

Part 4When the job is zero-rated

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Zero-rating is for building a new dwelling from scratch, and it covers your labour plus the building materials you supply with it. All of these have to hold:

• The building is designed as a dwelling: self-contained living accommodation, no direct internal access to another dwelling, and no planning condition preventing separate use or sale.
• Statutory planning consent has been granted, and the work is carried out in line with it.
• Any building that was there before has been demolished to ground level, unless planning specifically requires a façade to be retained.

New buildings for a relevant residential or relevant charitable purpose can also be zero-rated, again on a certificate from the customer.

Two things sit outside it. Professional services are always 20%, so the architect, surveyor and structural engineer charge VAT even on a zero-rated plot. And materials sold on their own are standard-rated: only the contractor doing the work zero-rates the materials they fit. A self-builder buying their own materials pays the 20% and reclaims it afterwards through the DIY Housebuilders Scheme, which has to be claimed within 6 months of finishing the build.

Part 5What stays at 20% even on a zero-rated new build

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This is where money goes missing, because the assumption "it's a new build, so everything is zero" is wrong. HMRC blocks a specific list, and it stays standard-rated no matter what the rest of the job is:

• Fitted furniture other than kitchen units. Fitted kitchen cupboards and worktops are fine. Fitted wardrobes, bedroom units and studies are not.
• Most electrical and gas appliances. Cookers, fridges, freezers, dishwashers, microwaves and washing machines are blocked, free-standing or integrated. Heating and hot water are not, so boilers, radiators and their controls are fine, and so are cooker hoods, ventilation and burglar alarms. Door entry systems count only in a building of several flats.
• Carpets, carpet tiles and underlay. Floorboards, tiles and laminate are building materials; carpet is not.
• Most landscaping. Topsoil, grass seed and turf within the site are fine. Planting trees, shrubs and flowers is 20% unless an approved planning landscaping scheme lists it, and so is landscaping beyond that.

Quote those items on their own lines with their own rate. The list is set out in VAT Notice 708, which is the reference to check when a job is close to the line.

Part 6One job, two rates

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A single invoice can carry more than one rate, and often should. You apportion between them and show each part separately, rather than picking whichever rate covers most of the work.

Conversion work, reduced-rated	£40,000.00
VAT at 5%	£2,000.00
The reduced-rated part	£42,000.00
Landscaping and appliances, standard-rated	£5,000.00
VAT at 20%	£1,000.00
Invoice total	£48,000.00

The reader can see which rate applied to which part of the job, which is exactly what a VAT inspector wants to see as well. Rolling it all into one figure at an averaged rate is not an option.

Part 7Who carries the cost of a wrong rate

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The VAT is your liability as the supplier, and that decides which mistake hurts more.

Charge too little and you pay the difference. If you invoice a job at 5% that should have been 20%, HMRC comes to you for the shortfall, with interest, and possibly a penalty. Whether your customer will hand over VAT you forgot to charge, months after the job finished, is your problem and not HMRC's.

Charge too much and you have a different mess. Your customer has overpaid, and cannot reclaim VAT that was never properly due, so you have to issue a credit note and refund it.

The work	£40,000.00
VAT at 20%	£8,000.00
VAT that was actually due, at 5%	£2,000.00
The difference, on one job	£6,000.00
What the customer was asked to pay	£48,000.00

That £6,000 is the real reason to check the rate before quoting rather than after. On a job like this the trade who knows the rate can be £6,000 cheaper than the one who doesn't, on identical work, at an identical margin.

Part 8The evidence, and where the reverse charge fits

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Any rate below 20% needs to be evidenced, because you are the one who has to justify it. Keep it with the job for 6 years:

• Planning consent for a new build or a conversion, and the approved drawings.
• Empty-property evidence for the 2 year rule: council tax records, electoral roll checks, or a letter from the council's empty property officer. A neighbour's word that "nobody's been in there for ages" is not evidence.
• The customer's certificate for care homes, student accommodation and charitable buildings.

One overlap to keep straight. The Domestic Reverse Charge applies only to standard and reduced-rated supplies, so zero-rated new build work is outside it entirely. Confusingly, the reverse charge rules also contain their own "5% disregard", which is a percentage of a job's value and nothing to do with the reduced rate of VAT. Our reverse charge guide keeps the two apart.

CIS is unaffected by any of this. A contractor deducts from the labour element whatever the VAT rate on the job turns out to be.

A real quote shows the rate stated on the document itself, with the VAT worked out per line rather than as one lump at the bottom.

Common questionsVAT rates on building work: quick FAQ

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What VAT rate do I charge on building work?

20% unless a specific rule says otherwise. Conversions that change the number of dwellings, non-residential to residential conversions and homes empty 2 years or more are 5%. A genuinely new dwelling is zero-rated. The work decides it, not your trade.

Is an extension zero-rated?

No. Extensions and alterations to a house that already exists are standard-rated at 20%. Zero-rating is for a new dwelling built from scratch, which is why a new house is 0% and adding to one is 20%.

Can I charge 5% VAT on a house that's been empty?

Yes, if it was unlived-in for the whole 2 years immediately before work started, and you can evidence it. Council tax records, electoral roll checks or a letter from the council's empty property officer are the usual proof. Keep it with the job.

Are appliances and carpets zero-rated on a new build?

No. Cookers, white goods, carpets, fitted furniture other than kitchen units and most landscaping stay at 20% even when the rest of the build is zero-rated. Price them on separate lines with their own rate.

Do I charge VAT on a new build for a private client?

You charge 0%, which is not the same as being outside VAT. It is still a taxable supply, it still counts towards your £90,000 registration threshold, and you still reclaim the VAT on what you bought for the job.

What happens if I charge the wrong VAT rate?

Undercharge and HMRC looks to you for the difference, with interest, whether or not your customer will pay it. Overcharge and you have to credit and refund the excess, because your customer cannot reclaim VAT that was never due. Both are avoidable by settling the rate before the quote goes out.

This guide is general information for UK tradespeople, current to the best of our knowledge in 2026, and is not tax, accounting or legal advice. Rates, thresholds and how they apply to you change, so confirm your position with HMRC, a qualified accountant or a solicitor before relying on it. TradeDraft accepts no liability for decisions made on the basis of this guide. Questions: hello@tradedraft.co.uk.