When you have to register
Check your turnover at the end of every month, looking back over the last 12 months. If it's gone over £90,000, you must register within 30 days. You must also register straight away if you expect to go over £90,000 in the next 30 days alone, for example because a big job is about to be paid.
Turnover here means what you charge for VAT-taxable work, including materials you supply. It's easy to reach with a busy year and a few large material-heavy jobs.
What registering does to your prices
Once registered, you charge VAT at 20% on most work and pay it to HMRC, usually every quarter. You can reclaim the VAT on your own business purchases, such as materials, tools and van costs.
For homeowners, who can't reclaim VAT, your price goes up by a fifth. For VAT-registered business customers it makes little difference, because they claim it back. Work out your rate without VAT, then add it on top when you quote.
Some building work has different rates. New-build homes are generally zero-rated, and some energy-saving installations have their own rates. Check HMRC's guidance for the work you do.
The Flat Rate Scheme
If your VAT-taxable turnover is £150,000 or less (excluding VAT), you can apply to use the Flat Rate Scheme. You still charge customers 20%, but you pay HMRC a fixed percentage of your VAT-inclusive turnover and keep the difference. You can't reclaim VAT on most purchases.
| Type of business | Flat rate |
|---|---|
| General building or construction services | 9.5% |
| Labour-only building or construction services | 14.5% |
| Limited cost business | 16.5% |
You count as a limited cost business if what you spend on goods is less than 2% of your turnover, or less than £1,000 a year. Labour-only trades often fall into this, and at that rate the scheme rarely saves money.
The domestic reverse charge
Since March 2021, most building and construction services supplied between VAT-registered businesses and reported under CIS use the domestic reverse charge. If you're a VAT-registered subcontractor working for a VAT-registered contractor, you don't charge them VAT. Your invoice says the reverse charge applies, and the contractor accounts for the VAT to HMRC instead.
It doesn't apply when you work directly for the end user, such as a homeowner, or for a customer who isn't VAT-registered. Then you charge VAT as normal.
The reverse charge can leave you reclaiming more VAT than you charge, because you still pay VAT on materials. Many subcontractors in that position switch to monthly VAT returns to get the money back sooner.
Common questions
Is the threshold based on profit or turnover?
Turnover: everything you charge for taxable work, including materials you pass on. Costs don't come off it.
Should I register voluntarily below the threshold?
It can make sense if most of your customers are VAT-registered businesses who can reclaim it, or you buy a lot of materials. For work mainly for homeowners, it usually just makes you dearer.
Does Making Tax Digital apply to VAT too?
Yes. Every VAT-registered business already keeps digital records and files VAT returns through compatible software.
Sources
- Register for VAT: when to register, GOV.UK. Checked 2 Nov 2026
- VAT Flat Rate Scheme: how much you pay, GOV.UK. Checked 2 Nov 2026
- VAT Flat Rate Scheme: eligibility, GOV.UK. Checked 2 Nov 2026
- VAT domestic reverse charge for building and construction services, GOV.UK. Checked 2 Nov 2026
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