Most work to an existing home is charged at 20% VAT, while qualifying new-home construction can be zero-rated and certain conversions or empty-home renovations can qualify for 5%. The correct rate depends on HMRC's conditions, not simply on calling the project a renovation, conversion or self-build. [1]
Existing homes: start with 20%
For an ordinary extension, loft conversion, basement added to an existing home or refurbishment, do not assume relief. HMRC's default for work to houses and flats is the standard rate unless a specific exception applies. Listed status is not, by itself, a general VAT exemption for alterations. [1] [2]
Ask for each quotation to state whether VAT is included. A VAT-exclusive amount is not the amount you should use when checking how much cash the project needs.
When 5% may apply
Qualifying conversions can include changing a non-residential building into dwellings or changing the number of dwellings in a building. Renovating qualifying residential premises that have been empty for at least two years immediately before the work starts can also attract the reduced rate, subject to detailed conditions and evidence. Adding a room to an occupied home is not the same test. [2]
Ask the contractor or tax adviser to identify the exact relief and the evidence required before relying on a reduced-rate quotation. For an empty property, assemble the occupation history and supporting records rather than relying only on a description in an estate agent's particulars.
New homes and zero rating
Qualifying construction of a new dwelling can be zero-rated, but HMRC sets tests for the building and the supplies involved. A project is not a qualifying new dwelling merely because most of the existing interior is replaced. [2]
Request a written VAT assessment of the actual approved scheme. In particular, ask how retained parts of an existing building, planning restrictions and separately supplied items affect the intended treatment.
Professional services and materials
Separately supplied professional services generally do not acquire the construction work's zero or reduced rate. Materials bought directly by the homeowner are also not automatically sold at the builder's relief rate. The contractual supply matters, including where services form part of a qualifying design-and-build supply. [2]
For budgeting, separate contractor invoices, consultant invoices and purchases you will make yourself. Ask the adviser to explain the treatment of each rather than applying one percentage to the entire spreadsheet.
Energy-saving installations: a dated exception
Qualifying installations of specified energy-saving materials currently benefit from zero rating. HMRC states that this temporary treatment ends on 31 March 2027, with the rate reverting to 5% from 1 April 2027. This does not make a whole extension zero-rated merely because insulation or a heat pump is included. The nature of the supply and the mixed-work rules still matter. [3]
For work spanning the change, ask the supplier to check the relevant VAT tax point rather than assuming the installation date alone fixes the rate.
The DIY housebuilders' scheme
A separate refund scheme exists for eligible self-builds and conversions. It is not a general refund for home improvements. For building work completed on or after 5 December 2023, the published claim deadline is no more than six months after completion. Check eligibility and the required invoices before purchases are made. [4]
Before signing, request a VAT breakdown, the basis for any relief and a clear explanation of who bears an adjustment if the proposed treatment is wrong. Obtain property-specific tax advice where eligibility is uncertain.