VAT on building work: the 20% default and the loft-conversion myth

VAT is the line homeowners most often forget when they budget — and the one piece of folklore about it, that loft and dormer conversions are somehow zero-rated, is wrong often enough to do real damage. The default position is simple and unforgiving: most building work to an existing home carries VAT at the standard 20%, and that includes the professional fees as well as the build. The reduced and zero rates exist, but they're narrower than the internet suggests. This page sets out which rate actually applies, based on HMRC's VAT Notice 708.

Building work falls into one of three VAT rates — standard (20%), reduced (5%) and zero (0%) — and which one applies turns on what the work is, not on who you are. It deals with the rules in the UK; the detail and the evidence requirements live in HMRC Notice 708.

The 20% default — and it includes the fees

Extensions, loft conversions, internal remodelling, repairs and general renovation of an existing dwelling are standard-rated at 20%. So are the professional fees — the architect or designer, the structural engineer, the surveyor — which are standard-rated regardless of the building work's rate. On a £100,000 build with £15,000 of fees, that's £23,000 of VAT, and it's the number people leave out when they compare a budget to a quote.

When the reduced 5% rate applies

A 5% reduced rate is available for specific kinds of residential work, where the conditions in Notice 708 are met and evidenced:

• Renovating a dwelling that has been empty for two years or more before work starts — the "empty homes" reduced rate.
• Converting a property so that it has a different number of dwellings than before — for example, turning one house into two flats, or two flats back into a single house.
• Converting a non-residential building into a dwelling — a barn, an office or a shop into a home.

Where the reduced rate applies, it's the contractor who charges 5% rather than 20% on the qualifying work — you don't reclaim the difference. The conditions are precise, and if they're not fully met HMRC treats the work as standard-rated, so the evidence matters. This is exactly the kind of edge case worth a specialist VAT check before the contract is priced.

When the zero rate is genuine

• Building a genuinely new dwelling from scratch is zero-rated — the eligible construction services and most materials carry no VAT.
• Certain conversions that create a dwelling, and qualifying work for charities, can also be zero-rated under Notice 708's conditions.
• Installing certain energy-saving materials in residential property is currently zero-rated under a time-limited relief — worth checking the current position, as the rate and the qualifying list change.

You usually can't reclaim it

A homeowner isn't VAT-registered, so VAT on work to your existing home is simply a cost — there's nothing to reclaim. The main exception is the DIY Housebuilders Scheme, which lets people building a new home (or carrying out a qualifying conversion) reclaim the VAT on eligible materials, even though they aren't in business. For ordinary extensions and conversions of an existing home, though, the VAT is final: budget for it.

How this connects to your Planning Permission Checker report

Planning Permission Checker's indicative cost ranges are about the scope and complexity of a project, not its VAT treatment — which is why we say plainly that VAT (usually 20%) and professional fees sit on top of build costs. Whether your specific project might qualify for a reduced or zero rate is a question of fact under Notice 708, and for a borderline case — an empty-home renovation, a conversion changing the number of dwellings — enquiries route to Hampstead Chartered Surveyors, an RICS-regulated practice (Firm Reg. 923064), who can point you to the right VAT specialist.