VAT on Building Work: A Homeowner’s Guide
Whether VAT is on your quote depends on who is doing the work and what the work is. Here is how it works, and how to check the figures before you accept.
The short version
VAT on building work depends on the business and the job. A good quote makes it obvious which applies to yours.
A contractor who is registered for VAT charges it on their work. A contractor who isn't registered can't. Some kinds of building work are treated differently from the usual rules, but most everyday work on an existing home is charged in the ordinary way when the contractor is registered.
As a homeowner paying for work on your own home, VAT is part of what the job costs you. That makes it one of the first things to check when you compare quotes, because a price shown without VAT and a price shown with it can look very different for the same work.
This guide explains the general principles and what to check on a quote. It doesn't state rates or thresholds, because those are set by government and can change. For the current figures and the detailed rules, GOV.UK is the source to rely on. For everything else about pricing and paying for work, see our homeowner's guide to building quotes and payments.
The basics
How VAT works on a building job
VAT is a tax on the sale of goods and services by businesses that are registered for it. A business has to register once its taxable turnover passes a threshold set by HMRC. A business below the threshold can choose to register, but doesn't have to. The current threshold is published on GOV.UK.
A VAT-registered contractor adds VAT to the price of their work and pays it over to HMRC. A business that isn't registered can't charge VAT at all. So two honest contractors quoting for the same job can arrive at quite different totals, simply because one is registered and the other isn't.
Businesses that are registered can usually reclaim the VAT they pay on their own costs. A homeowner paying for work on their own home generally can't. That is why VAT matters so much more to you than to the contractor: for them it passes through, for you it is part of the price.
None of this says anything about quality. A registered contractor is not better or worse than one below the threshold. Our guide to sole traders and limited companies covers the differences between types of business that do matter.
Why quotes differ
Six ways VAT changes what a quote looks like
When two quotes seem far apart, VAT is one of the first things to rule in or out.
Registered or not
A registered contractor charges VAT on their work. One below the threshold who hasn't registered doesn't. The difference can be larger than the gap between their underlying prices.
Shown with or without VAT
Some quotes show a figure before VAT and add it at the bottom. Some show only the total. Others show a figure and leave it unclear. Ask every contractor to confirm whether their total includes VAT.
The type of work
Some building work is treated differently from the usual rules, with conditions attached. It depends on what the work is and the property it is done to, so it is worth asking any contractor who applies a different treatment to explain why.
Who buys the materials
If the contractor supplies materials as part of the job, they are part of the contractor's price. If you buy materials yourself, you pay whatever VAT the supplier charges, and the contractor prices only their labour.
Allowances and extras
Where a quote includes an allowance for uncertain work, or where extra work is agreed later, check whether VAT is added on top. The headline may include it while the extras don't, or the other way round.
Deposits and stage payments
If the contractor is registered, VAT generally applies to each payment towards the job, including the deposit. Check that the deposit and the balance add up to the same total as the quote.
Not all building work is charged in the usual way. Building a new home, some conversions and renovations, and some energy-saving installations can qualify for different treatment, each with its own conditions, and the rules have changed over time. HMRC sets out the detail on GOV.UK in its guidance on VAT for building and construction (VAT Notice 708) and the related notices. If a contractor applies a different treatment, ask which rule they are relying on. Some treatments need information or a declaration from you.
Checking your quote
Five checks on the VAT in a quote
None of these takes long, and all of them are fair to ask of any contractor.
Ask whether the contractor is VAT registered
A registered business has a VAT registration number. It usually appears on quotes and invoices, and a VAT invoice has to show it.
Check the number on GOV.UK
GOV.UK has a free service to check a UK VAT number. It confirms whether a number is valid and the name of the business it is registered to. The name should match the business on your quote.
Confirm the total includes VAT
If the quote shows a figure before VAT, work out the full amount you will actually pay and use that when you compare quotes. Our guide to comparing building quotes explains how to compare them fairly.
Check the allowances and extras
Ask whether any provisional sums and any day rates for extra work include VAT. It is easy to overlook, and it affects the final bill.
Ask for a VAT invoice
When you pay a registered contractor, ask for a proper invoice showing the VAT. Keep it with your other records. Our guide to invoices and receipts for building work covers what to keep.
What good looks like
A clear quote on VAT
A quote that answers the left-hand column leaves nothing to guess.
What a clear quote shows
- The business name, matching the one you'll pay
- A VAT number, if the business is registered
- Whether the total includes VAT
- The VAT amount, where it is charged
- Whether allowances and extras include VAT
- The payment terms, including the deposit
Worth asking about
- A total with no mention of VAT
- A VAT number that doesn't check out
- VAT charged by a business that isn't registered
- A different treatment with no explanation
- A lower price offered for cash with no VAT
- No invoice offered once you pay
Paying without VAT
Why a cash price without VAT isn't a saving
Now and then a homeowner is offered a lower price for paying in cash, with the VAT left off. It can sound like a straightforward saving. It is worth understanding what it actually involves.
If the business is registered, it is required to account for VAT on its work whether or not it puts it on your invoice. Leaving it off doesn't make the tax go away. It only means the transaction isn't recorded properly.
For you, the practical problem is the paperwork. Without a proper invoice, it is harder to show what you paid for, when and to whom. That record matters if you need to use a warranty, raise a problem with the work, or show a buyer or surveyor what was done when you sell. Our answer on whether you should pay a builder in cash covers the wider points.
The simplest approach is to pay by a traceable method, such as bank transfer or debit card, and to ask for an invoice every time. That keeps the record clean whether or not VAT applies.
Terms you may come across
The reverse charge, and other things that don't change your bill
You may hear about the domestic reverse charge for construction services. It changes how VAT is handled between VAT-registered businesses in the construction supply chain. It is not aimed at homeowners paying for work on their own home, where the contractor charges VAT in the usual way if they are registered.
Likewise, the Construction Industry Scheme (CIS) is about how contractors in the industry pay each other and account for tax. It isn't something a homeowner operates when paying for work on their own home.
If a contractor mentions either of these in connection with your job, it is reasonable to ask how it affects what you pay. For a straightforward domestic job, the answer is usually that it doesn't. Our short answer to whether building work includes VAT sums up the position.
This is general information, not legal or tax advice. VAT rules, rates and thresholds are set by government and can change. For the current position, rely on GOV.UK and HMRC's published guidance, or a qualified adviser for your circumstances.
Planning your budget
Building VAT into your numbers
When you set a budget for a building project, set it including VAT. It is the figure you will actually pay, and working from it avoids an unwelcome surprise when the first VAT-inclusive invoice arrives.
When quotes come in, convert every one to the full amount payable before you compare them. Then look at the scope, the materials and the other things a quote should include. VAT is one reason quotes differ. It is rarely the only one.
Keep the same approach for anything that changes once the job has started. If extra work is agreed, confirm whether the price includes VAT at the same time you agree the price itself. Our guide to variations and extra costs explains how to agree changes cleanly.
The same goes for the deposit. Check that the deposit figure on the quote is calculated from the same total you are comparing, so the deposit and the balance together come to the price you agreed.
How Mortaro handles your quotation
One clear figure, and someone to ask
Mortaro coordinates domestic building work, carried out by an independent main contractor from our network and named in your quotation. Your contractor prices the work after the site visit, and we prepare it as a clear written quotation that sets out the price and the payment terms: a 25% deposit to secure the works and the balance on completion.
Payments are made by bank transfer, legally to your contractor, and we pass them on as their payment administration agent. Your quotation states whether VAT is included. That depends on whether your contractor is VAT registered; Mortaro itself is not VAT registered.
Payments explained sets out exactly how the money moves.
Straight answers
Questions about VAT on building work
Do all builders charge VAT?
No. Only businesses registered for VAT can charge it. A smaller business below the registration threshold may not be registered, and then it can't add VAT to your bill. The current threshold is on GOV.UK.
How do I know if a contractor is VAT registered?
Ask for their VAT number. It should appear on their quote and invoices, and you can check it with the free VAT number checker on GOV.UK, which also shows the name it is registered to.
Can I reclaim the VAT on work to my own home?
Generally, a homeowner paying for work on their own home can't reclaim VAT. There are specific schemes for some situations, such as building a new home yourself, with their own conditions. GOV.UK sets these out.
Is VAT charged on the deposit?
If the contractor is registered, VAT generally applies to each payment towards the job, including the deposit. Check that the deposit and the balance together add up to the VAT-inclusive total on your quote.
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