Last updated: 14 October 2026
When can a contractor charge 5% VAT to renovate a property?
A VAT-registered contractor can charge the reduced rate of 5% on renovating or altering a home that has been empty for at least 2 years before work starts. The 5% rate also applies to converting a non-residential building into homes, and to changing the number of dwellings, for example turning a house into flats. Ordinary renovations of an occupied home are standard-rated at 20%.
Work that qualifies for 5%
| Project | Condition |
| Renovating an empty home | Not lived in for 2 years or more before work starts |
| Converting commercial property into homes | For example an office, shop or barn converted to a dwelling |
| Changing the number of dwellings | For example a house split into flats, or flats combined into one house |
| Converting a house into a care home or a house in multiple occupation | Specific rules apply |
The rate covers the contractor’s services and the building materials they supply as part of the work. Materials you buy yourself are standard-rated.
Evidence of the empty period
The contractor will need evidence that the property was empty for 2 years, such as:
- council tax empty-property records
- utility bills showing minimal use
- a letter from the council’s empty property officer
- electoral roll records
If you buy an empty property, the 2-year period can include time before you owned it.
Example
An investor buys a house that has been empty for 3 years and spends £60,000 on renovation. At 5%, the VAT is £3,000. At 20%, it would be £12,000, a saving of £9,000.
Renovations at 20%
- Extensions and refurbishments of occupied homes
- Kitchen and bathroom refits in a home that was lived in recently
- Repairs and maintenance
- Listed buildings, unless one of the 5% conditions applies
Zero-rated work
Building a new home is zero-rated. Installing certain energy-saving materials in residential property, such as insulation, solar panels and heat pumps, is zero-rated until 31 March 2027.
Landlords and VAT
Residential landlords can’t usually reclaim VAT, because residential rent is exempt. That makes the 5% rate valuable. If you convert a building and sell it as new homes, you may be able to register and reclaim VAT as a developer.
Common renovation VAT mistakes
The reduced 5% rate only applies to qualifying work, such as renovating a home that has been empty for 2 years or more, or converting a building into a different number of homes. Builders often charge 5% without evidence. Keep council tax records or utility bills showing the property was empty, and get the builder to confirm the rate on each invoice. Materials bought by the owner separately are standard-rated.
Frequently asked questions
Is the 2 years from when I bought it?
No. It is how long the property was not lived in before work starts, regardless of ownership.
Can I use the 5% rate for my own home?
Only if the conditions are met, for example it was empty for 2 years before you moved in.
Who decides the rate?
The contractor, but you should provide evidence and confirm the rate in writing.
What about DIY conversions?
You may reclaim VAT on materials under the DIY housebuilders scheme. See DIY housebuilder VAT reclaims.
Related: VAT on listed building roofs and landlord expenses.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT on property renovations. See our property accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
