When do I have to register for VAT as a tradesperson?

When your VAT-taxable turnover exceeds the registration threshold — £90,000 as of 1 April 2024, unchanged for 2026 — in any rolling 12-month period, or when you expect to exceed it in the next 30 days alone. You can also register voluntarily below the threshold, which is usually worthwhile if most customers are VAT-registered businesses who can reclaim.

What VAT rate applies to boiler installations?

Standard 20% for replacement or maintenance on existing dwellings. Zero-rated on qualifying new-build dwellings. 5% on properties empty for 2+ years (with council evidence). For energy-saving materials like heat pumps in existing homes, 0% applies until March 2027 under the 2022 Spring Statement extension, then reverts to 5%.

Do I charge VAT on a new-build extension?

An extension to an existing dwelling is standard-rated at 20%. Zero-rating under VAT Notice 708 applies only to the construction of a qualifying new dwelling — a standalone new build. Extensions, conversions of existing living space, and refurbishments all attract 20% VAT even if the homeowner disagrees.

What is the VAT domestic reverse charge?

Since 1 March 2021, VAT-registered construction businesses supplying services to other VAT-registered and CIS-registered businesses (who are not the end user) do not charge VAT on their invoice. Instead, the customer accounts for the VAT on their own return. You show £0 VAT with a clear 'Reverse charge — customer to account for VAT' statement. Governed by VAT Notice 735.

Is the VAT flat rate scheme worth it for tradespeople?

For labour-heavy sole traders with low material costs, the 9.5% flat rate can save admin time and some tax. For tradespeople buying significant materials, standard accounting is usually better because you can reclaim input VAT on purchases. The 'limited cost trader' rule (flat rate jumps to 16.5%) catches many labour-only subbies, making standard accounting the better choice.

VAT for Tradesmen UK: Standard, Reduced and Zero Rates Explained

Q: What evidence do I need for a reduced-rate or zero-rated VAT invoice?

For empty-home renovations at 5%: a letter from the council confirming the property has been empty 2+ years. For new dwellings at 0%: planning permission and Building Regulations approval. For disabled adaptations at 0%: a written declaration from the customer confirming they are chronically sick or disabled. Keep evidence with the job file — HMRC can audit VAT back four years.

The three rates you'll encounter

Almost all construction, repair, and maintenance work in the UK falls under one of three VAT rates:

•Standard rate — 20%. This covers most repair, replacement, and maintenance work on existing buildings. Boiler replacement, rewires, extensions on existing dwellings, bathroom refits, kitchen installs, roofing repairs.
•Reduced rate — 5%. This covers certain energy-saving materials, residential conversions (e.g. a house into flats or a pub into a dwelling), renovations of dwellings empty for 2+ years, and some installations of mobility aids for the elderly.
•Zero rate — 0%. This covers construction of qualifying new dwellings, approved alterations to listed dwellings used as the owner's home (narrowed since 2012), and certain adaptations for disabled people.

When you must register for VAT

You must register for VAT when your VAT-taxable turnover exceeds the registration threshold — £90,000 as of 1 April 2024 and unchanged for 2026. This is turnover in any rolling 12-month period, not a tax year. You must also register if you expect to exceed the threshold in the next 30 days alone.

You can register voluntarily below the threshold. This lets you reclaim VAT on business purchases (vans, tools, fuel, materials). If most of your customers are businesses who can reclaim VAT, voluntary registration is usually worth it. If most are homeowners, it just makes you 20% more expensive.

VAT Notice 708 — the construction bible

VAT Notice 708 'Buildings and construction' is HMRC's definitive guidance on which rate applies to which type of construction work. It is long and dense, but the key rules for most sole traders are:

•Construction of a new qualifying dwelling (a brand-new house or flat intended to be used as someone's home) — zero-rated
•Conversion of a non-residential building into a dwelling (barn conversion, office into flats, pub into a house) — 5%
•Renovation of a dwelling that has been empty for 2+ years — 5% (requires evidence, usually a council tax exemption letter)
•Installation of qualifying energy-saving materials in a residential property — 0% until March 2027, then 5% (per the 2022 Spring Statement extension)
•All repair, replacement and maintenance on existing dwellings — 20%
•Commercial work — almost always 20%

How to prove the reduced or zero rate applies

HMRC accepts reduced or zero-rated VAT only when you can prove the conditions are met. Without proof, they'll assess the difference and charge interest.

For empty-home renovations, get a letter from the council confirming the property has been empty for 2+ years. For new dwellings, get a copy of the planning permission and the building regulations approval. For disabled adaptations, get a written declaration from the customer confirming they are chronically sick or disabled and the work is for their domestic use.

Keep the evidence with the job file. HMRC can audit your VAT back four years.

The domestic reverse charge (B2B construction VAT)

Since 1 March 2021, VAT-registered construction businesses selling to other VAT- and CIS-registered construction businesses do not charge VAT on their invoice. Instead, the customer accounts for the VAT on their own return. This is the domestic reverse charge (VAT Notice 735).

The effect is that you show £0 VAT on those invoices, with a clear statement: 'Reverse charge — customer to account for VAT to HMRC.' You still record the sale in Box 6 of your VAT return; the customer records the VAT in both Box 1 and Box 4, netting to zero.

Reverse charge does NOT apply when the customer is the end user — typically a homeowner, a landlord using the property privately, or a building owner occupying the building themselves. In those cases, you charge VAT at the normal rate.

Worked examples

These three scenarios cover the bulk of UK sole-trader work:

•Boiler replacement in a tenant-occupied semi for a private landlord: 20% VAT, standard invoice. The landlord is the end user.
•First fix for a main contractor on a new-build housing site, both VAT- and CIS-registered: 0% on the labour (new dwelling is zero-rated), but reverse charge applies — show £0 VAT with the reverse-charge wording.
•Installing solar panels on a homeowner's existing house in 2026: 0% VAT on the full job (energy-saving materials concession until March 2027), standard invoice to the homeowner.

The flat rate scheme — is it worth it?

The VAT flat rate scheme lets small businesses pay a fixed percentage of turnover to HMRC instead of calculating input and output VAT on every transaction. For construction, the flat rate is 9.5% of gross turnover.

For labour-heavy sole traders with low material costs, the scheme can save admin time and a small amount of tax. For tradespeople buying significant materials, it's usually worse than standard accounting because you lose the input VAT reclaim on those purchases. The 'limited cost trader' rule (where the flat rate jumps to 16.5%) catches many labour-only subbies — at 16.5% you're almost always better off on standard accounting.

Common mistakes

These errors cost tradespeople money and trigger HMRC enquiries:

•Charging 5% for a full house refurb when it should be 20% because the property wasn't empty long enough
•Not charging VAT on jobs you forgot took you over the registration threshold months ago (HMRC bills you the VAT plus penalties)
•Charging 20% VAT on B2B construction work that should have been reverse-charged — contractor rejects the invoice
•Applying reverse charge to end-user jobs and leaving £4,000 of VAT off a £20,000 invoice that should have carried it
•Not keeping the evidence for a zero- or reduced-rated job, and being reassessed at 20% three years later

Generate VAT-correct documents from your phone

TradeDoc AI handles the 20/5/0 rates, the domestic reverse charge wording, and the 'end user' declaration automatically. Pick the job type, answer two questions, and the invoice comes out with the correct VAT treatment baked in. Free for 7 days, no card required.