VAT is one of the largest line items in a renovation budget, and one of the least understood. Most work is charged at the standard rate, but some projects qualify for far less. Knowing which category yours falls into, before you sign a contract, can change the real cost of the job.
This is general information, not tax advice. Rules and rates change, so always confirm with HMRC or a qualified adviser.
The Default: 20%
For most renovation work on a home that people are living in, a VAT-registered builder charges the standard 20% on both labour and materials. That includes kitchens, bathrooms, redecoration, and most refurbishment and repair work to lived-in homes.
If your builder is not VAT-registered, they will not charge VAT at all. That is not a discount on the work itself, so compare quotes on the same basis, and ask whether the price includes VAT.
When the Rate Can Be 5%
A reduced rate of 5% can apply in these cases:
1. Renovating a home that has been empty for at least two years. Repairs, alterations and associated work to a residential property empty for two years or more can qualify. “Empty” means no occupants at all, not even occasional ones.
2. Changing the number of homes in a building. Splitting a house into flats, or merging two properties into one, can qualify.
3. Converting a non-residential building into homes. A first-time conversion of, for example, a barn, office or warehouse into dwellings can qualify for the reduced rate.
When the Rate Can Be 0%
- New dwellings. Building a new home is zero-rated, which is why new build projects are treated differently from refurbishment.
- Certain conversions of long-unused buildings. Where a non-residential building has been unused for a long time, specific conditions (including a ten-year period) can allow 0% on the conversion work.
- Energy-saving materials in homes. Installations such as insulation, heat pumps and solar panels have been zero-rated for a period of time. The end date has been extended before, so check the current position on GOV.UK before relying on it.
Let the Builder Supply the Materials
For reduced-rate work, the relief generally applies to what the builder supplies and fits as part of the job. Materials you buy separately usually do not qualify. If your project may qualify, ask your builder to supply and fit the materials, and to itemise them on the invoice.
Proving Eligibility
You will usually need evidence. For a home empty for two years or more, common proof includes:
- Council tax records
- Utility records
- Electoral roll entries
- A letter from the local authority’s empty homes team
For conversions, evidence of the previous use is needed, such as planning documents. Your builder may also ask you to sign a written confirmation of eligibility. Do not guess: an incorrect declaration can lead to the VAT being recovered later.
DIY Schemes for Non-Registered Owners
Individuals who build or convert a home to live in can sometimes reclaim VAT paid on eligible materials through HMRC’s DIY house builder scheme, rather than paying a reduced rate up front. The claim has a time limit after completion, so check the deadline with HMRC before you start. The eligibility rules are strict, and the scheme does not cover ordinary refurbishment of a lived-in home.
Check Your Invoices
Whatever the route, review every invoice:
- Is VAT shown separately, and at the rate you expected?
- If you were told 5% or 0% applies, is that what the invoice says?
- Are labour and materials split correctly?
- If the invoice defaults to 20%, ask why before paying
Mixed-Use Buildings and Landlords
If a building is partly commercial, costs need to be split between the residential and commercial parts. Landlords letting homes should also take advice: VAT paid on work to residential rentals often cannot be reclaimed.
A Short Checklist
- Is the property lived in, or has it been empty? For how long?
- Does the project change the number of homes, or convert a non-residential building?
- Is your builder VAT-registered, and is the VAT included in the quote?
- If reduced or zero rate may apply, do you have the evidence?
- Will the builder supply and fit the materials, with them itemised?
- Does every invoice show the right rate?
- Have you checked the current rules on GOV.UK, or with an adviser?
Questions to Ask Your Builder
- Is the quote inclusive or exclusive of VAT?
- Are you VAT-registered?
- Could any part of this project qualify for 5% or 0%?
- What evidence do you need from me?
- Will materials be supplied and itemised by you?
At Alborz Groups, we set out every quote clearly so you know what is included before work starts. If you’re planning a renovation and want a straightforward breakdown, get in touch for an initial consultation.
