VAT on Construction

Value Added Tax applied to construction services. In the UK, building a new dwelling is zero-rated for VAT; extensions to existing dwellings are standard-rated at 20%. However, some work on properties not lived in for more than 2 years may qualify for the 5% reduced rate. Homeowners cannot reclaim construction VAT, making it a significant cost. Contractors charging below the VAT registration threshold (£90,000 in 2024) may not charge VAT.