VAT on building work: when is it 0%, 5% or 20%?

1. Building a new home: 0%

Building a new dwelling is zero-rated: the builder's work, and the building materials they supply as part of it, carry 0% VAT. This is set out in HMRC's VAT Notice 708 (Buildings and construction).

The relief is for genuinely new buildings. Work on an existing home — even a major one — does not count as constructing a new building.

2. Conversions and changing the number of homes: 5%

The reduced rate of 5% can apply when premises are converted into a single household dwelling — for example a barn, office or shop turned into a home — or when the work changes the number of dwellings, such as turning a house into flats or flats back into a house.

The conditions are detailed and the builder needs to be able to show they are met, so make sure the VAT treatment is written into the quote.

3. Renovating a home that has been empty: 5%

Renovating or altering a home that has been empty for at least two years can also qualify for the 5% rate. Proof that the property was empty for that period is needed — for example from the council's empty property records.

4. Energy-saving materials: 0% (until 31 March 2027)

Installing energy-saving materials in homes — such as insulation, solar panels and heat pumps — is zero-rated for installations made between 1 May 2023 and 31 March 2027, under HMRC's VAT Notice 708/6. After that date the rules are set to change, so check the current notice for work planned later.

5. Extensions, alterations and repairs: usually 20%

Most work to existing homes — extensions, loft conversions, refurbishments, repairs and maintenance — is charged at the standard rate of 20%, unless one of the reliefs above applies.

6. Building your own home? Reclaim the VAT

If you build a new home yourself, HMRC's self-build scheme lets you reclaim VAT on many building materials. For work completed on or after 5 December 2023, the claim must be made no more than six months after the building work is finished.

7. Business customers: the domestic reverse charge

When a VAT-registered business buys building services that are reported under the Construction Industry Scheme, the domestic reverse charge usually applies: the customer accounts for the VAT instead of the builder. Homeowners are not affected — they pay VAT in the normal way.

• Read our guide to the reverse charge: domestic reverse charge construction