VAT Rates on Renovation Works: 20%, 5%, and 0% Explained

Domestic renovation works can attract three VAT rates: 20% standard rate (the default for most renovation and building works), 5% reduced rate (qualifying renovation of empty properties, dwelling-number changes, and certain residential conversions), and 0% zero rate (qualifying energy saving materials supplied and installed, and specified disability adaptations). The correct rate depends on the nature of the specific work — not on the project as a whole. A single project can include works at all three rates.

3 rates

Why this matters

The default assumption — that all renovation work is 20% — means homeowners routinely pay too much VAT on qualifying elements. The correct rate must be applied at the point of invoicing. There is no general mechanism to reclaim overpaid VAT on renovation after completion. Getting the rate right before contracting is the only opportunity.

The key distinctions

20% standard rate — general renovation, extension, fit-out

Building works to renovate, extend, or refurbish an occupied residential property. Kitchen and bathroom installation, internal fit-out, decoration, plastering, structural work on an occupied dwelling.

5% reduced rate — qualifying renovation scenarios

Qualifying renovation of a property empty for 2+ years (Notice 708 Section 8.3), works that change the number of dwellings in a building (Section 8.2), and certain other qualifying conversion scenarios under Notice 708.

0% zero rate — energy saving materials

Qualifying ESM supply-and-install (insulation, heat pumps, solar, wind, water turbines, micro-CHP, draught stripping) in a domestic building. Currently 0% until 31 March 2027, then 5% from 1 April 2027.

0% zero rate — disability adaptations

Specified works to adapt a dwelling for a disabled person's use under VATA 1994 Schedule 8 Group 12. Conditions include a declaration from the disabled occupant and the works being in their principal residence.

Practical checklist

Review each element of your project and identify the applicable VAT rate before contracting
Confirm with your contractor the rate they intend to apply to each element and the basis for it
Insist on a separately itemised quotation where different rates apply to different elements
Gather evidence for any qualifying conditions — empty period, ESM specification, disability declaration
Do not assume 20% on everything — check whether any elements qualify for 5% or 0%
Note that there is no general reclaim route for overpaid renovation VAT after completion

HMRC notice references

HMRC Notice 708 Section 8—Reduced-rate renovation supplies

HMRC Notice 708/6—Energy saving materials — zero-rate

HMRC Notice 701/7—Disability adaptations — zero-rate

VATBuild is not affiliated with HMRC. References to HMRC publications are for informational purposes. Always consult a qualified tax adviser before making decisions about VAT on your project.

How VATBuild helps

What VATBuild checks for this situation

VATBuild maps each invoice line item to the applicable VAT rate rule and checks whether the rate charged is correct. It presents a complete rate analysis for your renovation project — 20%, 5%, and 0% lines identified separately — and generates correction reports for any lines where the wrong rate has been applied.

Can I reclaim VAT on renovation?Energy saving materials VAT Empty property 5% VAT Renovation VAT checklist