Can my contractor charge zero VAT on labour for my new build?

Yes — a VAT-registered contractor must charge zero percent VAT on labour and on materials they supply and fix as part of new dwelling construction, under VAT Act 1994 Schedule 8 Group 5. The contractor recovers their input VAT through their own VAT return. You should never pay 20 percent VAT to a contractor on new dwelling construction work — if the contractor's invoice shows VAT, ask them to confirm the zero rating and reissue. Specialist sub-contractors (electricians, plumbers) supplying to the main contractor are also zero-rated within the chain.

What if my contractor isn't VAT registered?

If your contractor is not VAT registered, they cannot charge VAT and they cannot reclaim VAT on their material purchases — so their material costs are 20 percent higher than a VAT-registered contractor's, and you cannot reclaim that VAT either. The DIY housebuilders' scheme only reclaims VAT on materials YOU purchase directly. For new build work, always use a VAT-registered contractor — the zero rating only operates through registered businesses, and unregistered contractors end up materially more expensive.

How much VAT can I expect to reclaim on a London self-build?

A typical £600k London self-build with a competent VAT-aware contractor pays zero VAT on the main contract (saving £80k–£120k versus standard VAT treatment). The DIY reclaim then recovers £8k–£35k on materials and fittings purchased outside the main contract — typically the kitchen, bathrooms, lighting, sanitaryware, and finishing items the client sources themselves. Total VAT savings versus a standard VAT-treated build run £90k–£155k on £600k of build cost.

Does the VAT reclaim apply to garden buildings or annexes?

Only if the building is a self-contained dwelling with its own planning use as a separate residential unit. A garden office, gym or studio is not a dwelling and does not qualify for zero rating or the DIY reclaim. A granny annex with separate kitchen, bathroom and access, granted permission as a separate dwelling, can qualify — but most granny annexes are granted as ancillary residential accommodation to the main house and therefore fall under standard VAT rules. Always confirm the planning use class with your local authority and HMRC before assuming eligibility.

VAT Reclaim New Build London 2026 | Builderr

How Does the VAT Reclaim Work for a London New Build in 2026?

A new build dwelling in the UK is zero-rated for VAT on contractor labour and most materials. Under the DIY Housebuilders' Scheme (VAT431NB), private individuals building or commissioning a new dwelling can reclaim VAT paid on eligible materials and services from HMRC within 6 months of completion. The reclaim typically saves £30,000–£90,000 on a £400k–£900k London self-build.

Zero-rating versus the DIY housebuilders' reclaim

Two separate VAT mechanisms benefit new build dwellings in the UK. First, VAT zero-rating: a VAT-registered contractor building a new dwelling charges zero percent VAT on their labour and on the materials they supply and fix, under VAT Act 1994 Group 5 of Schedule 8. The contractor recovers their input VAT on purchases and passes the zero rate to the homeowner directly — no reclaim is needed. Second, the DIY Housebuilders' Scheme (HMRC form VAT431NB): private individuals building or commissioning a new dwelling can reclaim VAT paid on goods they purchase directly from suppliers (typically kitchen, bathroom, fittings and finishes) where the contractor route did not apply. The combined effect is that a properly structured London self-build pays effectively zero VAT on the bulk of the build, with the DIY reclaim mopping up materials bought outside the main contract.

Eligibility for the DIY housebuilders' scheme in 2026

To qualify for the VAT431NB reclaim, the build must: (1) constitute a new, separate dwelling (not an extension, conversion, or annex to an existing home unless it is a self-contained living unit with its own access, kitchen, bathroom and separate planning use); (2) be for private use as the claimant's home or a relative's home — not for sale or business letting; (3) hold full planning permission (outline plus reserved matters approval is acceptable); (4) be built or commissioned by the claimant as a non-VAT-registered private individual. Builds for sale, or commercial speculation, are excluded — they fall under standard VAT rules and the developer reclaims via their own VAT return. Conversions of non-residential buildings (barns, offices, churches) to residential are eligible under VAT431C (Conversions) at the 5 percent reduced rate, not the zero rate. Knockdown rebuilds qualify if the existing structure is fully demolished.

What you can and cannot reclaim

Reclaimable items include: building materials incorporated into the structure (bricks, blocks, timber, plasterboard, roofing, insulation, plumbing pipework, electrical cabling, windows, doors, staircases, fitted kitchen units, sanitaryware, boilers, radiators, fitted wardrobes that are 'building in' rather than freestanding, tiles, paint, primary flooring); professional services that form part of construction (architect fees are NOT reclaimable, but structural engineer site-installed elements are if invoiced separately). Non-reclaimable items include: carpets and underlay (specifically excluded by HMRC), white goods (fridge, washing machine, dishwasher), freestanding furniture, soft furnishings, garden landscaping below ground, swimming pools, tools and equipment hire. Common pitfalls: appliances 'integrated' into kitchen units are still not reclaimable; carpets are excluded even when fitted; lifts and home automation systems are reclaimable if installed as part of the build but not if added post-completion. Maintain individual VAT receipts for every reclaim line.

The 2026 process and deadlines

The DIY VAT reclaim is now a digital-first process (HMRC moved to fully online claims in December 2023). Submit VAT431NB online within 6 months of the building being completed. 'Completion' is defined as the date of the building control completion certificate, or first occupation, whichever is earlier. From the digital submission, HMRC typically responds within 6–10 weeks with the refund — though complex London claims with £50k+ refunds can take 12–16 weeks. You can claim once only — there is no facility to submit a second claim later, so collate all receipts before submitting. Documentation required: building control completion certificate, planning permission, evidence of property occupation, individual VAT invoices for each reclaim line item (HMRC sample-audits roughly 1 in 4 claims), and a schedule reconciling invoices to the reclaim total. Builderr's project handover pack includes a pre-formatted VAT431NB schedule with all qualifying invoices indexed.