Last updated: 14 October 2026
How can a builder who isn’t VAT-registered claim back VAT on costs?
In most cases, they can’t. Only VAT-registered businesses can reclaim VAT on their costs. If you are a builder below the £90,000 threshold and not registered, the VAT you pay on materials, tools and vans is simply part of your costs. You can claim the full VAT-inclusive cost as an expense for income tax. The only way to recover VAT is to register, voluntarily or because you must, and then reclaim it on future purchases and some earlier purchases.
Options for an unregistered builder
1. Claim the gross cost for income tax
VAT you can’t reclaim is part of the cost of your materials and expenses. It reduces your taxable profit, so you get tax relief at 20% or 40%, plus Class 4 NIC.
2. Register voluntarily
Once you are registered, you can reclaim VAT on purchases, and on pre-registration purchases within these limits:
- goods you still hold, bought in the last 4 years
- services bought in the last 6 months
3. Let the customer buy the materials
If a homeowner buys the materials directly, they pay the VAT, and you charge only for labour. This keeps your turnover lower, but the customer can’t reclaim VAT either.
4. DIY housebuilders
If your customer is building their own new home, they may reclaim VAT on materials through the DIY housebuilders scheme. See DIY housebuilder VAT reclaim.
Should you register?
| You mostly work for | Registering usually… |
| VAT-registered contractors (reverse charge) | Helps: you charge no VAT and reclaim VAT on costs |
| Homeowners | Hurts: you add 20% to your price |
| New-build developers | Helps: new-build work is zero-rated, so you reclaim VAT |
Example
A builder buys £30,000 of materials a year, paying £6,000 VAT. Unregistered, the £36,000 is a business expense. Registered and working on zero-rated new builds, he reclaims the £6,000 and charges no VAT to his customer.
Watch the threshold
Materials you supply count towards your £90,000 turnover. Track it monthly on a rolling 12-month basis.
Common mistakes
- Showing VAT on an invoice when you aren’t registered, which isn’t allowed
- Assuming the reverse charge means you don’t need to register
- Leaving VAT on materials out of your price calculations
Common VAT mistakes in construction
Builders often apply the domestic reverse charge to work for end users, such as homeowners, who are outside it, or forget to apply it to work for other VAT-registered builders. Check each customer’s status before invoicing, and ask main contractors to confirm in writing whether they are an end user. Keep records of the 5% and 0% jobs separately, and keep the evidence that supports each rate.
Frequently asked questions
Can I reclaim VAT on a van if I’m not registered?
No, but you can claim capital allowances or the cash basis expense on the VAT-inclusive price.
Can my customer reclaim VAT on my materials?
Only if they are VAT-registered and you invoice them with VAT.
If I register, can I backdate the claims?
Yes, within the 4-year (goods) and 6-month (services) limits.
Is CIS affected?
No. CIS deductions apply to labour whether or not you are registered.
Related: VAT for plumbers and trades and pre-registration VAT.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT for builders. See our VAT 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.
