For builders, plumbers, electricians and other trades · 2026

VAT for tradespeople: threshold, reverse charge and rates

The short answer

You must register for VAT once your taxable turnover goes over £90,000 in any 12 months. Most work for homeowners is then charged at 20%. When you work for a VAT-registered contractor on CIS jobs, the construction reverse charge usually applies and the contractor accounts for the VAT instead.

Threshold

When do tradespeople have to register for VAT?

Your VAT-taxable turnover for the last 12 months (a rolling period, not the tax year) goes over £90,000.
Or you expect turnover to go over £90,000 in the next 30 days alone.
You can deregister if turnover falls below £88,000.

Turnover means what you charge customers, including materials you supply, not your profit. A busy trade business can pass the threshold faster than expected, so check the rolling total every month.

Rates

VAT rates on building work

Work	Rate
Repairs, maintenance, extensions and improvements to existing homes	20%
Installing energy-saving materials in homes (solar, heat pumps, insulation), until 31 March 2027	0%
Building a new home	0%
Renovating a home that has been empty for 2+ years, or converting non-residential property into homes	5%

Conditions apply to the 0% and 5% rates. Check HMRC notices 708 and 708/6 before quoting.

Reverse charge

The construction VAT reverse charge

It applies when all of these are true:

the work is a construction service covered by CIS
both you and your customer are VAT-registered
your customer is registered for CIS and isn't the end user (or an intermediary supplier connected to them)
the supply is at the standard or reduced rate

Your invoice shows the VAT amount and says “reverse charge”, but you don't collect the VAT: the contractor accounts for it. It never applies to work for homeowners.

Schemes

Flat Rate Scheme and cash accounting

Flat Rate Scheme: pay a fixed percentage of turnover instead of working out VAT on each purchase. Many trades that buy few goods count as “limited cost traders” and pay 16.5%, which often costs more than normal VAT.

Cash accounting: pay VAT when customers pay you, not when you invoice. Useful if customers pay slowly.

All VAT-registered businesses must keep digital records and file returns through Making Tax Digital software.

CIS registration: register as a subcontractor.
CIS calculator: deductions and refunds.
Self-employed tax calculator: your Income Tax and NI.
Sole trader vs limited company: which leaves you more.

VAT for tradespeople FAQs

You must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days. You can deregister if it falls below £88,000.

Only once taxable turnover goes over £90,000 in a rolling 12 months. The threshold is the same for sole traders and limited companies. You can register voluntarily below it, which can help if most of your customers are VAT-registered businesses.

Since March 2021, for most building and construction services covered by CIS, supplied between VAT-registered businesses, the customer (usually a contractor) accounts for the VAT to HMRC instead of paying it to the subcontractor. It doesn't apply when you work for the end user, such as a homeowner.

Yes, if they are VAT-registered: most repair, maintenance and improvement work on existing homes is charged at the standard 20%. The reverse charge doesn't apply to homeowners. Some work is charged at 0% or 5%, such as installing energy-saving materials and building new homes.

Installing qualifying energy-saving materials, including solar panels, heat pumps and insulation, in homes is zero-rated until 31 March 2027. From 1 April 2027 it returns to the reduced rate of 5%.

It can save admin for small businesses with VAT-taxable turnover up to £150,000, but many trades that buy few goods count as 'limited cost traders' and must use a 16.5% flat rate, which rarely saves money. Compare it with standard VAT accounting before joining.

General information based on HMRC guidance (September 2026), not tax advice. See GOV.UK VAT registration and the construction reverse charge.

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VAT for tradespeople: threshold, reverse charge and rates

The short answer

Work

Rate

Repairs, maintenance, extensions and improvements to existing homes

20%

Installing energy-saving materials in homes (solar, heat pumps, insulation), until 31 March 2027

Building a new home

Renovating a home that has been empty for 2+ years, or converting non-residential property into homes

VAT for tradespeople FAQs

You must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days. You can deregister if it falls below £88,000.

Installing qualifying energy-saving materials, including solar panels, heat pumps and insulation, in homes is zero-rated until 31 March 2027. From 1 April 2027 it returns to the reduced rate of 5%.

VAT for tradespeople: threshold, reverse charge and rates

When do tradespeople have to register for VAT?

VAT rates on building work

The construction VAT reverse charge

Flat Rate Scheme and cash accounting

More tax guides for trades

VAT for tradespeople FAQs

VAT for tradespeople: threshold, reverse charge and rates

When do tradespeople have to register for VAT?

VAT rates on building work

The construction VAT reverse charge

Flat Rate Scheme and cash accounting

More tax guides for trades

VAT for tradespeople FAQs

VAT for tradespeople: threshold, reverse charge and rates

When do tradespeople have to register for VAT?

VAT rates on building work

The construction VAT reverse charge

Flat Rate Scheme and cash accounting

More tax guides for trades

VAT for tradespeople FAQs

What is the VAT threshold in 2026?

Do sole traders have to register for VAT?

What is the construction reverse charge?

Do tradespeople charge VAT to homeowners?

Is there VAT on installing solar panels or heat pumps?

Should I use the VAT Flat Rate Scheme?

VAT for tradespeople: threshold, reverse charge and rates

When do tradespeople have to register for VAT?

VAT rates on building work

The construction VAT reverse charge

Flat Rate Scheme and cash accounting

More tax guides for trades

VAT for tradespeople FAQs

What is the VAT threshold in 2026?

Do sole traders have to register for VAT?

What is the construction reverse charge?

Do tradespeople charge VAT to homeowners?

Is there VAT on installing solar panels or heat pumps?

Should I use the VAT Flat Rate Scheme?