Do I have to pay VAT on my self build?

For a self-build home the labour and materials will be exempt from VAT, which means a saving of 20 per cent over the cost of a new home from a developer. You don’t need to be VAT registered – all the materials and labour you use in building your own home are free of VAT.

If you hire a single registered contractor, bills for labour and materials should not include VAT. If you manage your own build, you will have to pay VAT initially, but this can be reclaimed within three months of completion of your build. 

Simply send all your invoices to HM Revenue and Customs and receive a refund for the VAT you have paid up front. Be warned though – this is a one-off opportunity and you can only make a single claim so make sure you submit all your invoices in one go.

Can VAT be reclaimed for extensions and home improvements?

Unfortunately, in most cases the answer is no. If a home has been unoccupied for at least three years, VAT is charged at the lesser rate of 5 per cent. If it is 10 years, then VAT is completely exempt.

What about building conversions?

VAT is recoverable on conversions of buildings such as barns, churches, and offices into dwellings.