VAT for Tradesmen (UK): A Plain-English Guide

When do you have to register for VAT?

You must register for VAT once your VAT-taxable turnover goes over the registration threshold, which is £90,000 in any rolling 12-month period (the figure that has applied since 1 April 2024). You also have to register if you expect to go over the threshold within the next 30 days.

"Rolling 12 months" trips people up: it is not your tax year or calendar year. At the end of every month you look back at the previous 12 months. If the total breaks the threshold, you must register, usually within 30 days.

Going over the threshold without registering on time can lead to penalties and a bill for the VAT you should have charged — so keep an eye on your rolling turnover as you grow.

Standard, reduced and zero rates

Most work tradespeople do is charged at the standard rate of 20%. But construction has some important exceptions.

A reduced rate of 5% can apply to certain residential work — for example, some conversions (such as turning a house into flats) and renovations of properties that have been empty for a qualifying period. The conditions are specific.

A zero rate (0%) can apply to certain new-build residential construction. Again, the conditions are strict and the paperwork matters.

There have also been time-limited rules for energy-saving materials (such as insulation and solar panels) in domestic properties. Because these reliefs change and have conditions, do not assume a rate — check the current HMRC guidance for the specific job, or ask your accountant.

The domestic reverse charge for construction (CIS)

Since 1 March 2021, the VAT domestic reverse charge applies to many construction services between VAT-registered businesses that are also registered for the Construction Industry Scheme (CIS).

In plain terms: when the reverse charge applies, you do not charge VAT to the contractor you are invoicing. Instead, the customer (the contractor receiving your service) accounts for the VAT to HMRC themselves. Your invoice still states how much VAT is due, but you do not collect it.

It applies to standard- and reduced-rated construction services supplied to a VAT- and CIS-registered business that is not the end user. It does not apply when you work directly for a domestic homeowner ("end user").

This is one of the most misunderstood areas of VAT in the trades. If you do subcontract work for other construction businesses, it is worth getting your invoicing checked by an accountant so your paperwork is correct.

Should you register voluntarily?

You can register for VAT before you hit the threshold, and sometimes it makes sense. If most of your customers are VAT-registered businesses, they can reclaim the VAT you charge, so registering lets you reclaim VAT on your own purchases (tools, materials, van costs) with little downside.

If most of your customers are domestic homeowners, registering makes you effectively 20% more expensive to them overnight, because they cannot reclaim it. For a homeowner-focused trade, staying under the threshold is often the better commercial decision.

The right answer depends on your customer mix and your costs. This is exactly the kind of question worth a short conversation with an accountant.

The Flat Rate Scheme

The VAT Flat Rate Scheme is designed to simplify VAT for smaller businesses. Instead of working out the VAT on every sale and purchase, you pay HMRC a fixed percentage of your VAT-inclusive turnover, and generally cannot reclaim VAT on most purchases.

It can reduce admin and, for some businesses, the amount of VAT paid — but for trades that buy a lot of materials, the standard method may work out better because you can reclaim input VAT. There is also a "limited cost business" rule that can push the flat rate up. Model both before choosing.

How to show VAT on your quotes and invoices

Once you are registered, your quotes and invoices should make VAT clear. Show the net (pre-VAT) amount, the VAT amount and rate, and the gross total. Include your VAT registration number on invoices.

A quote that buries VAT inside a single figure causes confusion and looks unprofessional. Listing it separately is clearer for the customer and keeps your records clean for your VAT return.

instanttradequote lets you set a tax rate on a quote so VAT is calculated and displayed automatically, with the net, VAT and gross totals shown on the branded PDF.

Frequently asked questions

What is the VAT threshold for tradesmen in the UK?

The VAT registration threshold is £90,000 of VAT-taxable turnover in any rolling 12-month period, the figure that has applied since 1 April 2024. You must register once you exceed it, or if you expect to within the next 30 days. Confirm the current figure with HMRC.

What is the VAT reverse charge in construction?

Since March 2021, the domestic reverse charge means that for many construction services between VAT- and CIS-registered businesses, the customer accounts for the VAT to HMRC rather than the supplier charging it. It does not apply when you work directly for a domestic end user.

Should I register for VAT voluntarily?

It can make sense if most of your customers are VAT-registered businesses who can reclaim the VAT, because you can then reclaim VAT on your own purchases. If you mainly serve homeowners, registering makes you about 20% more expensive to them. The right choice depends on your customer mix — ask an accountant.

Do I charge VAT to a homeowner?

If you are VAT registered, you generally charge VAT on work for domestic customers at the applicable rate (usually 20%). The reverse charge does not apply to domestic end users. If you are not VAT registered, you do not charge VAT at all.