HMRC runs a refund scheme that lets people who build their own homes get back the VAT they’ve spent on materials and certain services. It’s called the DIY Housebuilders VAT Refund Scheme. And it can save you thousands of pounds if you qualify.

This guide explains everything you need to know:

• What Is VAT Reclaim On New Build?
• How To Claim VAT Back On A New Build House?
• How Does The HMRC Self-Build VAT Refund Scheme Work?
• And Much More…

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What Is VAT Reclaim On New Build?

The idea behind the Self-Build VAT Refund Scheme is simple. It helps people who build their own homes get the same benefit that big property developers already have. When a developer builds and sells a new home, that sale is classed as zero-rated. This means they don’t charge VAT to the buyer, but they can still reclaim all the VAT they spent on building costs.

For someone building their own house, things work a bit differently. You’ll usually pay the standard 20% VAT rate on most of your materials and on some services. Once your project is finished, HMRC lets you claim that VAT back through the DIY Housebuilders Scheme.

It’s a one-time refund you apply for after the home is complete. A nice way to recover some of what you spent along the way!

What Kind Of Building Projects Can I Reclaim VAT On?

You can reclaim VAT on self build home if your project falls into one of these categories:

• Building a new residential property: This is the most common situation. If you’re building a completely new house from the ground up, you can claim back the VAT on materials and some services that qualify.
• Converting a non-residential building: You can use this scheme to get VAT back if you are turning something that was not a home before, like a barn, chapel or office, into a new residential property.
• Rebuilding a house: If you’ve demolished an existing property and are replacing it with a new one, this counts as a new build. Usually, the old structure needs to be taken down completely.
• Creating a new dwelling by extending an existing building: This is a bit more complex. If you create a completely new, separate dwelling within an extension, it can qualify. But only if the project creates a qualifying, genuinely new dwelling.

Are There Any New Build Projects Where I Can’t Claim Back VAT?

Yes, you cannot claim VAT back on a new build house if:

• The building is an extension or renovation of an existing dwelling (unless very specific conversion rules apply).
• Renovating a property that has been lived in within the last 10 years doesn’t count. If it’s been empty for a decade or more, that’s different and it would be a conversion.
• Live-work units where planning permission prevents the business and residential parts from being sold or used separately are also generally excluded.
• You built it for commercial or business use (rather than personal residential/holiday) and it fails the residential criteria.

How To Reclaim VAT On New Build House?

Here’s how the self-build VAT refund scheme works, step by step.

• You buy stuff and pay VAT: As you’re building your house, you’ll be buying materials from builders’ merchants and other suppliers. They’ll charge you the standard 20% VAT. The most important thing is to get a proper VAT invoice for every purchase. If you don’t have an invoice, you can’t claim a refund.
• Your builder shouldn’t charge you VAT for labour: This is a key point. For the actual work your builder does on a brand-new house, they should be charging you a “zero rate” of VAT. That means no VAT added to their labour costs at all. If your builder does charge VAT by mistake, don’t just pay it and hope HMRC will refund it. They won’t. Ask your builder to fix the invoice before you pay.
• The house is finished: .You can only make your claim once the build is complete. The clock starts ticking usually from the date on your Building Control Completion Certificate. Keep that certificate safe because you’ll need it.
• You send your claim to HMRC: When everything’s done, fill out form VAT431NB. You can do this online or by post. You’ll also need to include copies of your invoices and other paperwork. Remember, you only have six months from the completion date to send your claim.
• HMRC checks your claim: Once you send it off, HMRC will review everything carefully. They’ll look at your invoices, your plans, and your completion certificate to make sure it all matches up.
• You get your refund: As long as everything is in order, HMRC will send the VAT refund straight to your bank account.

How Do I Submit My Claim?

As discussed above, you can submit your claim in two ways:

1. Online through HMRC’s portal VAT

You can fill out the VAT431NB form online and upload all your supporting documents. These include your completion certificate and planning permission.

You’ll also need to upload a schedule of your invoices. You are not required to upload every single invoice at the time of submission. Instead, HMRC will contact you later to request specific invoices for review.

Once submitted, you’ll receive confirmation and a reference number.

2. By post

If you prefer, you can send a paper version of the VAT431NB form to HMRC. Make sure your paperwork is well organised.

Important:

You must submit your claim within six months of the date your build is officially completed. The completion date is the one shown on your Building Control Completion Certificate. This used to be three months, but HMRC extended the deadline to six. They rarely accept late claims, so try to get everything ready as soon as your project is signed off.

Once HMRC has your claim, they’ll review it carefully. If everything is in order, your refund will be paid directly into your bank account.

What Will I Need To Submit With My VAT Claim?

When you send your VAT refund claim, HMRC will ask for a few key documents.

1. The VAT431NB form
   This is the main form for DIY housebuilders. It’s what you use to make your official claim.
2. A schedule of invoices
   Create a clear list of all the invoices you’re claiming for. Include the supplier names, invoice numbers, dates, and amounts.
3. Proof that your home is finished
   You’ll need to include your Building Control Completion Certificate. This shows that your build is officially complete.
4. A copy of your planning permission
   This proves that your project was approved by your local council.
5. Your building plans
   Include a copy of your approved plans. HMRC uses these to confirm the type of build and that it meets the rules.

Original VAT invoices (to be held)
Keep all your invoices safe and organised. Each one must show the supplier’s VAT number, a clear description of what you bought, and the VAT amount.

Since the rules changed in December 2023, you no longer need to send all your invoices with your claim. Instead, HMRC will ask to see a selection of them later. That’s why it’s so important to keep everything neat and easy to find.

What Does Notice 431NB Mean?

VAT Notice 431NB is the official guide from HMRC for people who build their own homes or charity buildings. It explains how the VAT refund scheme works, who can apply and what counts as a qualifying cost. In short it tells you the rules for claiming back the VAT you’ve paid on building materials and certain services when you build a new home yourself.

You’ll also use Form VAT431NB to send in your claim once the build is complete.

The “NB” stands for New Build. There is also a version called Notice 431C, which covers building conversions instead. Make sure you are using the one that matches your type of project.

How Much VAT Can I Claim Back On My Self-Build?

How much you get back really boils down to what you are building. But the basic rule is you can get the VAT you paid on eligible building materials and services refunded. For a new build home, here’s what you need to know:

• 20% on eligible materials: You can claim back the standard 20% VAT on all the stuff that is actually going into the building. Such as bricks, timber, windows. In short, anything that becomes a fixed part of the new house.
• Labour is usually zero VAT: For the actual construction work carried out by a VAT registered builder or contractor on a new build, they shouldn’t be charging you any VAT on their labour. It’s ‘zero-rated’ from the start. So if your builder accidentally adds it to the invoice, you need to tell them to fix it before you pay. HMRC won’t refund you for their mistake.
• Conversions are a bit different: If you’re turning a barn or an old office into a home, the labour is often charged at a lower 5% VAT rate. You can claim this 5% back under a different scheme, along with the 20% on any materials you buy yourself.

Which Materials Can I Reclaim VAT On?

You can generally claim VAT on anything that becomes a permanent part of the building or its site. Here is a list of common reclaimable items:

• Basic building materials like bricks, cement, timber and insulation.
• Roofing materials, slates and tiles.
• Windows, doors, and double-glazed units.
• Standard fitted kitchen units and worktops (but not appliances).
• Fixed floor coverings, such as tiles and wood flooring (but not carpet).
• Bathroom suites, showers, toilets and basins.
• Plumbing and electrical installations, including boilers, radiators, wiring, and sockets.
• Built-in items like an airing cupboard or under-stair storage.
• Boundary walls and fences.

Which Materials Can I NOT Reclaim VAT On?

It is just as important to know what you can’t claim for. You cannot claim VAT back on anything decorative, removable or non-essential.

Though, HMRC has a very long list, here are some of the most common exclusions:

• Professional fees: This includes costs for architects, surveyors & project managers.
• Appliances: White goods like ovens, fridges, washing machines, and dishwashers, even if they are built-in.
• Fittings and furniture: Carpets, curtains, blinds (unless sealed inside window units), free-standing furniture, and most fitted wardrobes are not covered.
• Tools and plant hire: Any tools, equipment, or machinery you hire for the build cannot be claimed for.
• Consumables: Things that are not permanently part of the building, like sandpaper, cleaning supplies, and fuel.
• Garden items: This includes garden sheds, furniture, and most landscaping costs (unless part of specific planning permission for a holiday home).
• Outbuildings: Separate buildings like a garden office, detached gym, or swimming pool building are not eligible unless they form a single dwelling under one planning consent.
• Utility connections: The cost of connecting utilities like gas, water, or electricity is often zero-rated. So there’s no VAT to reclaim anyway.

What Happens If I Use A Builder Or Subcontractor?

This is a common area of confusion. The short answer is: it depends on how the builder invoices you.

• If your builder is VAT-registered and the work qualifies as a new build, they should not charge VAT on their labour. Or on any materials they supply. The construction of new dwellings is normally zero-rated. Hence, there is no VAT to reclaim on that part.
• If you buy the stuff yourself, you’ll be charged the normal 20% VAT. That’s the VAT you can claim back at the end of the project.
• If you hire subcontractors, the same rule applies. If their work is directly linked to the construction of a new dwelling, it should be zero-rated. And there’s no VAT to reclaim.

So basically, you can only claim back VAT on things you personally paid VAT on. If your contractor has already zero-rated their work, you can’t claim anything back on that.

Always check your invoices. And this is super important. If you see your builder has charged you VAT on work that should have been zero-rated, get them to fix it before you pay. HMRC won’t refund you for their mistake.

Can You Claim Back VAT On Extensions and Renovations?

Generally, NO! you cannot claim VAT back on simple extensions or renovations. The self build VAT refund scheme only applies when you are building a completely new dwelling. Or converting a non residential property into a new home!

The Exceptions:

You might qualify for a reduced VAT rate in some situations. For example, if you are working on a property that has been empty for at least two years or if you are splitting one home into two (or combining two into one), your builder may be able to charge only 5% VAT on their labour and materials.

You won’t get a refund from the government under the self-build scheme. But that lower rate can still save you quite a bit at the start of the project.

VAT Reclaims For Conversion Projects

Reclaiming VAT can be a huge help if you’re taking on a big renovation. Yes, you can claim it back if you convert a building that wasn’t a home before. Such as an old barn, office or school, into a brand new place to live. It is done through a different part of the DIY scheme which is called VAT Notice 431C.

Here is how it generally works for a conversion:

If you’ve hired contractors, they should charge you a reduced rate of 5% VAT on their work. And if you go and buy materials yourself, you’ll pay the usual 20% VAT at the till.

When everything’s finished, you send your claim to HMRC to get back both the 5% you paid to your contractors and the 20% on the eligible materials you bought yourself.

Just a couple of things to keep in mind: The scheme can also cover converting a residential building that’s been empty for at least 10 years. But you’ll need solid evidence to prove that. And you can’t claim under this scheme if you’re just renovating a property that’s been recently lived in.

VAT Reclaim Rules For Listed Buildings

You need to be extremely careful with listed buildings as here rules are a bit tough. Since 2012, most repair, maintenance & alteration work on Listed Buildings is charged at the standard 20% VAT rate. And you cannot claim it back.

There is some good news, though. If you have planning permission to demolish a listed building but keep part of it, such as the front wall, and then build a new house behind it, your project might be treated as a new build. In that case, you could qualify for the normal DIY Housebuilders Scheme.

It’s always best to check with HMRC or your local planning authority before starting work as the rules for listed buildings are complicated.

VAT Reclaim Mistakes to Avoid

While working on a VAT reclaim on new build projects, these are the errors that usually sink a self-build claim:

1. Missing the Deadline: Once you get that completion certificate for your house, the clock is officially ticking. You have 6 months (for projects completed on or after December 5, 2023) to submit the claim. HMRC is strict about this and late claims are rarely accepted.
2. Losing Invoices: Consider your invoices as pure gold. You need to keep every single one safe and sound. Since late 2023, HMRC only asks for a sample but if you lose one for a big item they want to see, you’ve pretty much lost the money for that. A bank statement won’t cut it.
3. Wrong Name on the Invoice:  This one is so simple but so important. Every invoice has to be in your name and match the site address. If it’s your company’s name or your architect’s, they’ll reject it.
4. Claiming for the wrong things: We know it is tempting to try and get everything back. But you can only claim on items that become a permanent part of the building. That means no tools, no furniture, no architect’s fees. Therefore, just don’t risk it. It’s not worth the trouble and will likely get your claim denied.
5. Being charged the wrong VAT rate: On a new build, your builder should be charging you zero VAT on their labour. If they put 20% on the invoice by mistake, you need to get them to correct it. HMRC will not refund you for their error.

Pros And Cons Of VAT Reclaim On New Build House

Alright, so before you get too excited about that big refund, it’s worth looking at both sides of the coin. Getting that money back can be amazing but it also comes with a bit of a process. Therefore, you must understand the potential benefits and drawbacks of reclaiming VAT on new builds. It’s important for a smooth and stress free process.

Pros Of VAT Reclaim for new Build

• Significant financial savings: This is the main advantage. By claiming back the 20% VAT on eligible materials you can cut the total cost of your build. On a large project that could mean saving thousands of pounds.
• Levels the playing field: When a developer builds and sells a new home, they operate on a zero-rated basis. This means they can recover their VAT costs. The DIY Housebuilders Scheme lets you do the same.
• Allows for better budgeting: By knowing you can reclaim the VAT on certain items, you can budget more effectively.
• You don’t have to do all the work yourself: The scheme allows you to employ VAT-registered builders and contractors. You don’t have to do everything yourself to qualify. Builders and contractors should charge zero VAT on labour for a new build. And you can still claim back the VAT on any eligible materials you buy and supply to them.

Cons Of VAT Reclaim for new Build

• Complex paperwork and rules: HMRC has very specific rules about what you can and can’t claim for. You’ll need to keep detailed records and submit a clear list of invoices. Even small mistakes can slow things down. Or might cause your claim to be rejected.
• Strict time limits: You must submit your claim within six months of your building’s completion. Miss this deadline and you lose your chance to reclaim the VAT. No matter how much you’re owed.
• Risk of rejected claims: HMRC checks everything carefully. Claims are often rejected because of missing or incorrect information, ineligible items or late submissions.
• Incorrectly charged VAT is not refundable: If your builder charges you 20% VAT on labour for a new build, HMRC won’t refund it. You’ll need to contact the builder. And get a corrected invoice with the proper zero rate. It can take time and cause delays.
• Only one claim per dwelling: You can only make one claim for each property. You have to wait until the build is completely finished and then submit everything at once. If you forget something, you can’t go back and simply re-claim it.

What Do You Need To Know About The VAT Reclaim On New Build Before Starting A Project?

The best time to learn rules about new build VAT reclaim is not when your build is done. It’s before you even start. And the most important thing is to be informed from the very beginning.

• Do your research: As we said, the most important thing to do is your research. The official rules are all laid out in HMRC’s guidance. For a new build, you’ll need to read VAT refunds for new builds if you’re a DIY housebuilder on the GOV.UK website. For conversion projects, the relevant guide is VAT refunds for conversions if you’re a DIY housebuilder.
• Plan and budget with VAT in mind: Understand which items are reclaimable and which aren’t. Budget for the non-reclaimable VAT from the start so there are no surprises.
• Keep meticulous records: From day one, get into the habit of keeping all your VAT invoices organised, ideally in a spreadsheet. Make sure they all have the correct details.
• Talk to your contractors: Discuss VAT from the get-go to ensure they understand the correct VAT rates they should be charging you, especially for zero-rated labour on a new build.
• Don’t rush the claim: Get your completion certificate and use the six-month window to ensure your single claim is as accurate and complete as possible.

The Bottom Line

If you’re building a new home in the UK (and you meet the criteria), you may very well be able to reclaim the VAT you paid on materials and certain costs. The key is to plan ahead and read the eligibility requirements carefully. Also, submit your claim on time.

The recent change extending the deadline from 3 months to 6 months (for projects completed December 2023 onward) gives you a bit more breathing space.

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Disclaimer: All the information provided in this article on How To Claim Vat Back On A New Build House? including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.