When you’re undertaking a self build the costs quickly stack up, and VAT has the potential to consume a significant portion of your budget. Most suppliers will charge you VAT at the standard rate of 20 per cent on the supply of materials and – depending on the work – on services too.
But if you’re building a new self build home or turning a building into a residential dwelling, you can claim a chunk of the VAT back from HM Revenue & Customs (HMRC) through what’s known as the DIY Housebuilder Scheme for self builders.
For first time self builders, this interest is usually sparked by the fear of dealing with HMRC. However, the rules are precise, and reasonably logical, so there’s no reason to worry or miss out on several thousands of pounds. Importantly, not every type of project qualifies and there are deadlines which must be met, so before you commit to a project it’s essential that you understand the rules that apply.
Article continues belowWhat is the DIY Housebuilder Scheme?
When a developer builds a new home, VAT on most of the development costs are zero rated, which means they can recover the VAT they incur. If you are building your own home, you don’t get this automatic treatment at the time of purchase because you are not a developer.
What the DIY Housebuilder Scheme does is put you in roughly the same position as a developer by giving you a process to zero rate VAT on certain costs, providing a one-off opportunity to reclaim the VAT you have paid on eligible materials used in the project.
There are two main variants that self-builders will use: one for new build homes and the other for claiming VAT concessions on conversions of non-residential buildings. The eligibility criteria are slightly different, but the overall idea is the same: you can reclaim the VAT on the materials used to create a new dwelling, or to convert a qualifying building into a dwelling.
Who can use the scheme?
If we look at new builds, the DIY Housebuilder Scheme is open to anyone building a property for residential use for you or your family, provided the building meets the definition of a new dwelling.
The scheme applies whether you build the whole project yourself, or employ trades to do the work on your behalf. The key is that the building has planning permission for use as a home. Your project must be lawful, for personal occupation by you or a family member and evidence of completion must be provided. Some planning permissions include conditions or restrictions on use or occupancy, which may mean that the project is not eligible.
It also applies if you buy a new shell from a developer and fit it out yourself, provided the overall project is again, one dwelling, and meets the normal criteria about planning and lawful use.
Extensions, refurbishments, or works that are part of an existing dwelling do not qualify because they don’t create a new separate dwelling in their own right. So loft conversion ideas, or double storey extensions to create more bedrooms will be eligible for VAT, just like any normal construction job.
What can you claim for?
Under the DIY Housebuilder Scheme you claim back the VAT you’ve actually paid on eligible goods and services that are part of the construction of the new home.
For a new build, this usually means that suppliers charge 20% VAT on construction materials such as bricks, timber, windows, insulation and so on, which is then claimed back within six months of completing the build.
Ideally, a builder, or contractor, supplying and installing materials should charge zero-rated VAT on qualifying new build projects, helping the cashflow and saving you the hassle of claiming back this VAT later.
The scheme is very straightforward, however, you must remember that you can only claim VAT on building materials that are physically incorporated into the dwelling or its site. As I'll come on to explain in more detail, if an invoice includes goods that aren’t eligible, such as carpets, kitchen appliances, plant hire, or consumables which aren’t physically part of the building, these must be removed from the final claim.
What can't you claim for?
If your project involves standard home improvements, such as an internal refurbishment of an existing dwelling, this doesn’t qualify because it’s not part of a new home or qualifying conversion. Similarly, VAT on home improvements or maintenance work cannot be claimed. Extensions that simply add floorspace to an existing home are treated as part of that existing dwelling, so again can’t be reclaimed.
If items are bought for the project, but not incorporated into the dwelling these cannot be included in the VAT reclaim either. Examples here are soft furnishings and kitchen appliances and, bizarrely, electric garage door motors and electric door bells.
There are exceptions, such as temporary fencing used for security purposes and external landscaping, provided that is approved by a planning condition. There’s a long list explaining what’s in and what’s not, so read the HMRC checklist and guidance notes carefully.
What do you need to do and when?
Usually, you cannot make a claim while the work is still ongoing, and must wait until the build or conversion is completed in accordance with the approved plans. Evidence of completion also needs to be submitted as part of the claim, such as a building regulations completion certificate from building control, or registered building control approver.
Once the building has been signed off as complete, the clock starts ticking. If your project finished after 5 December 2025, under the latest rules you’ll have six months from the date of completion to submit your VAT reclaim to HMRC.
To make the claim, you must complete the appropriate HMRC claim form – VAT431NB for new builds, or use the online service HMRC now provides. The claim must include a schedule of all the invoices you’re claiming against, copies of your planning permission and evidence of completion.
Under the newer digital claim process, you no longer have to send all original invoices with the initial claim, but you do need to keep them on file because HMRC may ask for them later for verification purposes.
What are the common pitfalls to avoid?
A common pitfall for self builders is collating the necessary invoicing and documentation. HMRC will only refund VAT that was actually paid and correctly charged, and if you don’t have a copy of the VAT invoices showing the supplier’s name, VAT registration number, the rate charged and a clear description of goods, HMRC may refuse to pay back the VAT. Electronic payment confirmations without a valid VAT invoice are generally not acceptable.
Another common problem is contractors charging incorrect VAT. Builders and tradespeople sometimes charge standard 20% VAT where a zero or reduced rate should apply. This is often down to their lack of understanding of the scheme, but as HMRC will not refund incorrectly charged VAT, it’s essential that you check that what’s being charged is right.
Self builders often assume that multiple claims can be made throughout a build. Unfortunately, this isn’t allowable and the rules are clear: you can make only one claim.
Finally, misunderstanding what counts as a qualifying material is quite common. Whilst the rules are explicit, they do change from time to time, so it’s always worth reading the detailed guidance notes. And don’t forget that if you buy materials that were used in the build, the VAT on these cannot be reclaimed.
A successful VAT reclaim requires planning and good record-keeping from the outset. It’s a good idea to make a habit of checking and understanding how VAT is charged on every single invoice. If something seems wrong, resolve it immediately. Plan to be organised, and have a system to catalogue all documentation and evidence for your claim.
If you have any doubt, it’s well worth visiting a Homebuilding and Renovating Show where you’ll find self build VAT specialists who will be happy to provide lots of advice and even explain the rules. They will even process your whole claim so there’s no reason to lose that weekend of your life as you wrestle the paperwork to make a VAT reclaim.
In the meantime, if you're still in the early stages of thinking about a self build project, find out how much it costs to build a house, and if sustainability is on your wish-list, take a look the costs for building an eco-home to see if it aligns with your budget.
