VAT in construction is not one rate: it is four treatments that depend on the work, the property and the customer: 20% standard rate, 5% reduced rate, 0% zero-rated, and the domestic reverse charge layered on top of business-to-business work. This guide maps each service type to its treatment for 2026, with the traps that catch trades out.
- Standard 20% applies to most building work: repairs, extensions, refits.
- Zero-rated: new-build dwellings and certain charitable buildings.
- 5% reduced rate: conversions to residential and renovations of qualifying empty properties.
- Reverse charge replaces VAT with a statement on B2B CIS work.
- Materials supplied with labour follow the work’s treatment.
Construction VAT rates by service type
| Service type | VAT treatment | Typical jobs |
|---|---|---|
| Repairs, maintenance, extensions to existing homes | 20% standard | Loft conversions, kitchens, roofing repairs |
| New-build dwellings | 0% zero-rated | New houses, new flats, new buildings for charities |
| Conversion of non-residential to residential | 5% reduced | Barn/office-to-flat conversions (conditions apply) |
| Renovation of empty residential property (3+ years empty) | 5% reduced | Qualifying conditions apply; evidence required |
| Building materials normally incorporated | Follows the work | Charged with the job, same treatment |
| Materials sold on their own (no construction) | 20% standard | Supply-only sales of tiles, radiators |
| Professional fees (architects, surveyors) | 20% standard | Not construction services themselves |
The single most expensive habit in the list is guessing: a new build invoiced at 20% instead of 0% either overcharges the customer or leaves you refunding it, and a repair wrongly invoiced at 0% is a VAT error you owe HMRC. HMRC’s VAT Notice 708 is the authority on which treatment applies; this table is the working version.
Worked examples
| Example | Treatment | Invoice shows |
|---|---|---|
| Extension on an occupied house | 20% standard | Net £10,000 + VAT £2,000 = £12,000 |
| New house build for a private client | 0% zero-rated | £250,000 with no VAT: see the template |
| Barn conversion to a dwelling | 5% reduced | Net £80,000 + VAT £4,000 = £84,000 |
| Kitchen refit in an existing home | 20% standard | Net £8,000 + VAT £1,600 = £9,600 |
| Labouring subcontract for a main contractor | 20% + reverse charge (conditions) | VAT shown but not charged: see the example |
The reverse charge layer
For standard and reduced-rate work between VAT-registered, CIS-registered businesses, the domestic reverse charge replaces the normal charge: you show the VAT that would have been due, state that the customer must account for it, and charge nothing. Zero-rated and reduced-rate work is never reverse charged, and end-user supplies are exempt from it: see when the reverse charge applies.
What decides the rate on a mixed job
A whole job can carry more than one treatment, and the invoice must show the split:
- Repairs vs new build on one site. Repairing an existing outbuilding on a new-build plot is standard-rated even when the main build is zero-rated. Invoice the treatments separately.
- Materials with vs without labour. Materials supplied with the construction service follow the work; materials sold alone are standard-rate. Splitting supply-only sales from installation matters.
- Conversion conditions. The 5% reduced rate on conversions depends on the property’s history and intended use, verify before invoicing at 5%, because getting it wrong means repaying VAT to HMRC from your own pocket.
What trades get wrong
- Invoicing a new build at 20% “to be safe”. Zero-rated work invoiced at 20% is an overcharge you may have to refund, and it complicates the client’s own VAT position.
- Assuming all residential work is 0%. Only new dwellings and qualifying conversions/renovations qualify. Most work to existing homes is standard rate.
- Forgetting CIS on top of VAT. The reverse charge removes VAT from the calculation, but the CIS deduction still applies to the labour figure.
- Changing treatment mid-job without telling the customer. If the treatment changes, reissue or credit the affected invoices so the VAT treatment stays consistent.
FAQ
What VAT rate applies to building work in 2026?
Most building work to existing properties is 20% standard rate. New-build dwellings are 0% zero-rated, and conversions to residential use or renovations of properties empty for at least 3 years can qualify for the 5% reduced rate, each with conditions set by HMRC.
Is a kitchen refit zero-rated or standard rated?
Standard rate. Work to an existing dwelling (kitchens, bathrooms, extensions) is 20%. Only new-build dwellings and qualifying conversions or renovations get reduced or zero rates.
What VAT rate is a new-build house?
Zero-rated (0%). The builder charges no VAT and can recover related input tax. Materials incorporated into the build follow the same treatment.
When does the reverse charge apply instead of normal VAT?
On standard and reduced-rate construction services between VAT-registered, CIS-registered businesses where the customer is not the end user. Zero-rated work and end-user supplies are excluded.
Do I charge VAT on materials on a construction invoice?
Materials supplied with the construction service follow the work’s treatment. Materials sold alone, with no construction service, are standard-rated 20%.
How do I invoice a job with mixed treatments?
Split the invoice into separate lines or separate invoices per treatment, with each line showing its own VAT rate or zero/reverse-charge status.
One last thing
The 5% reduced rate is the one that catches trades out most: it depends on the property’s history (empty for at least 3 years, or a qualifying conversion), and it is your responsibility to verify before invoicing. When in doubt, confirm the property’s history in writing from the client before you set the rate.