VAT on home extensions and conversions: when you pay 20%, 5% or 0%

A rear or side extension to a house you already live in is normally charged at 20% VAT. Converting a barn, an office or a long-empty building into a home can be charged at 5%, and building a new home is zero-rated. The rate turns on what the work creates and what the building was before, not on how big the job is. This guide sets out HMRC's rules for householders planning building work, with the points to check before you accept a quote.

Figures and rules were checked against GOV.UK on 11 October 2026. They come mainly from HMRC's VAT Notice 708, which GOV.UK last updated on 26 August 2026. This is general information, not tax advice, and the facts of your project decide the rate.

The three rates and what each applies to

Most work on an existing home is charged at 20%. The 5% and 0% rates apply only to specific conversions, long-empty homes and new dwellings.

Extensions: why 20% is the default

HMRC's notice says work to an existing building is normally standard-rated (Buildings and construction, VAT Notice 708). A rear or side extension, or any work that adds rooms to a house without creating a separate home, falls under that rule. The notice also says most "granny" annexes are not qualifying conversions.

There is one extension route to zero-rating. An extension can be zero-rated to the extent that it contains an additional dwelling. The new dwelling must be wholly within the extension and designed as a dwelling. The notice's example is a new flat built on top of an existing building. If the new dwelling is partly or wholly inside the existing building, the 5% "changed number of dwellings" rate may apply instead.

Conversions and empty homes: the 5% rate

The reduced rate covers qualifying conversions. One example is a building that has never been lived in, such as an office or barn, becoming a home. Another is a building ending up with a different number of homes, such as a house split into flats. It also covers renovating a home that has not been lived in for the two years before the work starts. Evidence can include Electoral Roll and Council Tax records, utility records, or a letter from a local authority Empty Property Officer.

Three limits are worth knowing before you plan the budget.

• Only the work connected to the qualifying change gets the reduced rate. Unrelated work in the same project stays at 20%.
• Within a qualifying conversion, scaffolding, landscaping, goods that are not building materials (carpets, fitted bedroom furniture) and professional services are standard-rated.
• Work that needs planning permission or building control approval that has not been granted is standard-rated.

The builder is responsible for charging the right rate, and you may need to supply evidence or a certificate. Ask for the rate and the reason on each line of the quote, and raise the 5% question before work starts, not after the invoice. As an illustration, VAT on a £40,000 (before VAT) qualifying conversion contract is £2,000 at 5% and £8,000 at 20%.

Does your builder charge VAT at all?

Only VAT-registered businesses charge VAT. A business must register if its taxable turnover for the last 12 months goes over £90,000, or it expects to pass that in the next 30 days. It can also register voluntarily below that (register for VAT). A small builder under the threshold may charge no VAT. A VAT-registered firm adds VAT at whichever rate applies to the work. Compare quotes on the same VAT basis. If you buy materials yourself, merchants charge the standard 20% on most of them, while a builder charges materials at the same rate as their work (VAT Notice 708, section 2.2).

The VAT domestic reverse charge for building services has applied since 1 March 2021 (VAT Notice 708). It applies where both supplier and customer are VAT-registered and the payments are reported under the Construction Industry Scheme. A householder who is not a VAT-registered business is outside it, so it does not change what you pay.

Professional fees, planning fees and the rest of the budget

The notice says architectural, surveying, consultancy and supervisory services are always standard-rated, so budget 20% on top of those fees whatever rate the building work carries. If you want an architect for the design stage, architects who take on house extensions are listed on MyLocalArchitects.co.uk.

Planning fees are a separate line. In England they are set nationally and rise each 1 April in line with inflation, capped at 10% (fees for planning applications). Building regulations charges are set locally. If your home is in London and you want the drawings priced up front, FixedFeePlans publishes its fees item by item, with the council's application fee shown alongside.

Claiming VAT back as a self-builder

If you build or convert your own home, the DIY Housebuilders Scheme lets you claim back VAT on eligible goods. You can claim once. For a conversion, you need planning permission (VAT refunds for conversions). You must also be doing one of three things. You could be converting a non-residential building into a home for you or your relatives. You could be converting a derelict home that has not been lived in for at least 10 years. Or you could be fitting out a shell bought from a developer. You are not eligible if you intend to sell or let the property.

For a conversion completed on or after 5 December 2023 the claim must be made no more than six months after completion (how to claim). The scheme covers conversions and new builds, so an ordinary extension to your existing home does not qualify. An extension that creates an additional dwelling can qualify under the new-build rules. Keep every invoice.

Before you sign: a short checklist

1. Ask the builder to state the VAT rate on each line of the quote and why.
2. Check whether the builder is VAT-registered, and compare quotes including or excluding VAT, not a mix.
3. If the building has been empty for two years or more, gather the evidence before work starts.
4. Add 20% VAT to architects' and surveyors' fees in your budget.
5. If you are converting for your own use, keep all invoices for a DIY Housebuilders claim.
6. If the rate is unclear, ask an accountant with VAT experience. You can find an accountant by city or start with tax planning.