Standard 20% VAT — most renovations
Default rate on construction services and materials. Applies to: extensions, refurbishments of occupied homes, kitchen/bathroom replacement, structural alterations to existing dwelling. VAT-registered contractor charges 20% on labour and materials supplied as services; homeowner cannot reclaim (only registered businesses reclaim). Mitigate: choose contractor with VAT-registered supplier network (better material costs offset VAT exposure).
Reduced 5% — empty property and conversion
Empty residential property unoccupied 2+ years (HMRC VAT Notice 708 paragraph 7): 5% on construction services. Evidence: council tax records, utility records, electoral roll. Conversion from non-residential (commercial to residential, agricultural to residential): 5%. Conversion of dwelling type (single to multiple flats; or multiple flats to single): 5%. Annexe addition for related family with separate access: 5% possible — case-by-case. HMRC can audit and demand repayment if status incorrect; contractor retains records 6 years.
Zero VAT — new build and listed
New-build dwelling (substantially separate from existing): 0% on construction services and materials. Demolition + new build on same plot: 0% if no original walls retained (materiality test). Alteration to listed building with LBC (HMRC VAT Notice 708 paragraph 9): 0% on approved alterations only; repairs/maintenance remain at 20%. 'Alteration' = creating something new/different (new extension, opening, wing); 'repair/maintenance' = restoring existing fabric. Boundary cases (replacing rotten window in listed building) typically = repair (20%). HMRC challenges on listed building VAT frequent; document scope carefully.
Energy-saving materials 5%
5% VAT on energy-saving materials in residential property (UK ESM VAT order 2022): heat pumps, solar PV, insulation (loft, wall, floor), draught-proofing, biomass boilers, micro CHP, energy-efficient boilers, heat-recovery ventilation. Time-limited until at least 2027. Combined: heat pump install at 5% material + 5% installation if part of energy-saving service. Does NOT apply to: EV chargers, smart thermostats alone, batteries (5% only if installed with PV).
