Costs and value
What VAT do you pay on building work to your home?
Short answer
Building work to an existing home, including an extension, a loft conversion or internal alterations, is standard-rated at 20%. The construction of a new dwelling can be zero-rated. Converting a building so that it contains a different number of dwellings, and renovating a home that nobody has lived in for the two years before work starts, can be charged at the reduced rate of 5%.
Installing listed energy-saving materials in a home, such as insulation, heat pumps or solar panels, is zero-rated until 31 March 2027. That relief does not apply when the insulation is part of building an extension.
The construction of a new building and work to an existing building is normally standard-rated. There are various exceptions to this.
The main cases
| Work | Usual rate | HMRC guidance |
|---|---|---|
| Extension, loft conversion, alterations or repairs to your existing home | 20% | VAT Notice 708, paragraph 2.1 |
| Approved alterations to a listed home | 20% since 1 October 2012 | VAT Notice 708, section 9 |
| Building a new house, the contractor's services | 0% | VAT Notice 708, section 3 |
| A new self-contained dwelling built wholly within an extension, such as a new flat on top of a building | 0% | VAT Notice 708, paragraph 3.2.5 |
| Converting a house into flats, flats into a house, or a non-residential building into a home | 5% | VAT Notice 708, section 7 |
| Renovating or altering a home that has not been lived in for the 2 years before work starts | 5% | VAT Notice 708, section 8 |
| Installing listed energy-saving materials in a home, as a job of its own | 0% to 31 March 2027, then 5% | VAT Notice 708/6, section 2 |
| Design, surveying and other professional services | 20% | VAT Notice 708, paragraphs 3.4.1, 7.6 and 8.4 |
Where the builder is not VAT registered, no VAT is charged at all. Registration is compulsory once taxable turnover for the last 12 months goes over £90,000.
The reduced rate: conversions and empty homes
The 5% conversion rate needs a change in the number of single household dwellings: one house becoming two flats, two flats becoming one house, or a barn or office becoming a home. It does not cover creating living accommodation that is not a single household dwelling, which HMRC says includes most "granny" annexes (paragraph 7.3).
The empty home rate needs the home to have been empty for the whole of the 2 years before work starts. Occasional use as a second home in that period rules it out (paragraph 8.3.3). HMRC accepts evidence from council tax and electoral roll records, utility companies, or a letter from the council's Empty Property Officer (paragraph 8.3.2). A second rule helps buyers of a house. If it had not been lived in for the 2 years before you acquired it, and no renovation was done in that time, the builder's work for you can be reduced-rated even though you have moved in, provided it takes place within 1 year of you acquiring the house (paragraph 8.3.4).
Both reduced rates cover the building work and building materials, including an extension or new windows built as part of the conversion or renovation. Scaffolding, landscaping, carpets and fitted bedroom furniture stay at 20% (paragraphs 7.6 and 8.4).
Both also carry a condition that catches people out. Where the work needs planning permission or building control approval and it has not been granted, the work is standard-rated (paragraphs 7.6.2 and 8.4.2).
Energy-saving materials: what the relief covers now
HMRC's Notice 708/6, last updated 31 January 2024, says installations of energy-saving materials in residential accommodation are zero-rated until 31 March 2027 and revert to 5% from 1 April 2027. The list covers controls for heating and hot water, draught stripping, insulation, solar panels, wind and water turbines, ground source and air source heat pumps, micro combined heat and power units and wood-fuelled boilers. From 1 February 2024 it added water source heat pumps, battery storage, smart diverters, and the groundworks for ground and water source heat pumps. Materials bought without installation, for example from a retailer, are standard-rated.
The common error is to apply this relief to an extension. HMRC's own example says that where the walls and roof of an extension are insulated as part of its construction, the whole job is one standard-rated supply, because the extension is the principal element (Notice 708/6, paragraph 2.5.1, example 4).
A worked example
You are building a rear extension. The builder's contract includes fitting thermostatic radiator valves throughout the house. HMRC treats that as one standard-rated supply of construction services, valves included.
Some weeks after work starts, you separately ask the same builder to fit the valves as a new job. HMRC's guidance says that later, separate request is a supply that qualifies for the relief (Notice 708/6, paragraph 2.5.2). Separate pricing and invoicing, a gap in time, and work that does not depend on the extension all point to a separate supply. HMRC notes that its examples may not apply where the contractual position is different, so settle the scope before the contract is signed.
Building a new home yourself
A self-builder does not charge themselves VAT, so there is nothing to zero-rate. HMRC's DIY housebuilders' scheme lets you reclaim VAT on eligible building materials and services for a new home or a conversion into a home. You can make one claim, and for work completed on or after 5 December 2023 it must be made no more than 6 months after the work is finished.
What this means for you
Ask every contractor to show VAT as a separate figure and to state which rate they are applying and why. If a lower rate depends on the property's history, gather the evidence before work starts. Keep VAT as its own line in the cost plan, as described in what a cost plan contains.
Sources
- HMRC: Buildings and construction (VAT Notice 708), sections 1 to 3, 7 and 8, last updated 26 August 2026 gov.uk
- HMRC: VAT on energy-saving materials and heating equipment (VAT Notice 708/6), sections 1 and 2 gov.uk
- Value Added Tax Act 1994, Schedule 8 (zero-rating), Group 5 legislation.gov.uk
- HMRC: Reclaim VAT on a self build home gov.uk
- HMRC: VAT rates gov.uk
- HMRC: Register for VAT gov.uk