Do tradespeople have to charge VAT?

You only charge VAT once you're VAT registered. You must register if your VAT taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days. Below that you can register voluntarily. Most trade work is then charged at the standard rate of 20%.

Do you have to charge VAT if you’re not registered?

No. You can’t charge VAT until you’re registered. Gov.uk puts it plainly: you must register for VAT to start charging VAT. If you’re not registered, your invoices show no VAT line and no VAT number, and the price you agree is the full price.

HMRC’s record keeping notice also says only VAT-registered businesses can issue VAT invoices. So leave VAT off your quotes and invoices completely until you have a VAT number.

What is the VAT registration threshold?

The threshold is £90,000 of VAT taxable turnover. It has applied since 1 April 2024, when it rose from £85,000, and it’s the figure on gov.uk as of October 2026. The test uses any rolling 12 months, not the tax year, and there’s a separate 30-day forward test.

Gov.uk sets out two tests. You must register if either is true:

1. Looking back. Your taxable turnover for the last 12 months goes over £90,000. You have 30 days from the end of that month to register, and you’re registered from the first day of the second month after you went over. Gov.uk’s example: over the threshold on 15 July, register by 30 August, registered from 1 September.
2. Looking forward. You expect your taxable turnover to go over £90,000 in the next 30 days alone, for example because you’ve won one big contract. You register by the end of that 30-day period, and you’re registered from the day you realised.

“Taxable turnover” means everything you sell that isn’t VAT exempt or outside the scope of VAT. Zero-rated and reduced-rate work counts towards it, and so does work under the domestic reverse charge. It’s turnover, not profit, so materials you pass on to customers count too.

If you register late, gov.uk says you must pay VAT on sales made since the date you should have registered, and you might get a penalty. The deregistration threshold is £88,000, so you can ask to cancel your registration if your turnover drops below that.

A simple habit: once a month, add up your invoices for the last 12 months. If you’re getting close, speak to an accountant before you cross the line, not after.

Should you register for VAT voluntarily?

You can register voluntarily below £90,000. It suits trades whose customers are mostly VAT-registered businesses, because they can reclaim the VAT you charge. It rarely suits trades working mainly for homeowners, who can’t reclaim it, so your price goes up or your margin goes down.

What you gain:

• you can reclaim VAT on materials, tools, your van and other business costs
• business customers can reclaim the VAT you charge, so it costs them nothing extra

What it costs:

• homeowners pay 20% more for the same work, unless you absorb some of it
• VAT returns and the record keeping that comes with them

Gov.uk says all VAT-registered businesses should now be signed up for Making Tax Digital for VAT, which means keeping some records digitally and filing returns through compatible software. HMRC also runs a Flat Rate Scheme for businesses with VAT taxable turnover of £150,000 or less (excluding VAT), where you pay a fixed rate to HMRC but generally can’t reclaim VAT on purchases. Whether that helps depends on your costs, so take advice before choosing.

What VAT rate applies to trade work?

Most work on existing homes and buildings is standard-rated at 20%. HMRC’s Notice 708 says construction work is normally standard-rated, with specific exceptions at 0% and 5%. Those exceptions have conditions, so check the notice before you use a lower rate.

The 0% and 5% rates aren’t a choice. If the job qualifies, that’s the rate. If it doesn’t, it’s 20%. HMRC may ask you to show why a lower rate applied, for example evidence that a property was empty for the 2 years before you started.

What changes on your invoices once you’re registered?

Gov.uk says once registered you’ll get a 9-digit VAT number that you must include on all invoices, and you must show VAT separately. VAT-registered customers need a proper VAT invoice, normally within 30 days of the work.

You can’t put VAT on invoices while you’re waiting for your number. Gov.uk’s advice is to raise your prices to cover the VAT you’ll owe from your registration date, then reissue the invoices showing VAT once the number arrives. The invoice guide sets out what a full VAT invoice must show.

How much difference does VAT make to a job?

Here’s an example with made-up figures. You’re quoting £1,500 for a job. Of that, £400 is materials, which cost you £480 including £80 VAT.

A business customer reclaims the £300, so the job still costs them £1,500. A homeowner pays the full £1,800. That gap is why voluntary registration suits some trades more than others. The VAT calculator adds or takes off VAT at 20%, 5% or 0%.

What is the domestic reverse charge for construction?

Since 1 March 2021, when a VAT-registered tradesperson does construction work for a VAT-registered contractor under the Construction Industry Scheme (CIS), the customer accounts for the VAT instead of you. It doesn’t apply to homeowners, or to customers who tell you in writing they’re an end user.

HMRC’s technical guide says the reverse charge applies when all of these are true:

• your customer is VAT registered
• the work is within the scope of CIS and the payment is reported under CIS
• the work is standard or reduced rated
• the customer hasn’t told you in writing that they’re an end user or intermediary supplier

In plain terms: a VAT-registered electrician working as a subcontractor for a VAT-registered building firm will usually invoice under the reverse charge. The same electrician rewiring a homeowner’s house charges VAT as normal, because a private householder isn’t VAT registered. A business having its own premises fitted out can tell you in writing that it’s an end user, and then normal VAT applies.

On a reverse charge invoice, HMRC says you must show all the usual VAT invoice details, say that the reverse charge applies (for example “Customer to pay the VAT to HMRC”), and state the VAT due or the rate, without adding the VAT to the amount you charge.

What about CIS?

CIS is separate from VAT. Gov.uk explains that contractors deduct money from a subcontractor’s payments and pass it to HMRC as advance payments towards the subcontractor’s tax and National Insurance. Deductions are taken at a higher rate if the subcontractor isn’t registered. Check gov.uk or your accountant for the current rates.

How does TradeLinkers handle VAT?

TradeLinkers only adds VAT once you’ve marked your business as VAT registered and entered your VAT number. You can then choose 0%, 5%, 20% or a custom rate, and your VAT number is printed on your invoices. If you’re not registered, no VAT lines appear.

TradeLinkers doesn’t handle the construction reverse charge or CIS deductions, so deal with those through your accountant or accounting software. More on the invoice app.

Sources

• GOV.UK: Register for VAT, when to register
• HMRC: VAT Notice 700/1 supplement (thresholds and dates)
• GOV.UK: Charge, reclaim and record VAT
• GOV.UK: VAT rates
• HMRC: Buildings and construction (VAT Notice 708)
• HMRC: Energy-saving materials and heating equipment (VAT Notice 708/6)
• HMRC: VAT domestic reverse charge technical guide
• HMRC: Record keeping (VAT Notice 700/21)
• GOV.UK: VAT Flat Rate Scheme
• GOV.UK: What is the Construction Industry Scheme

This guide is general information for UK sole traders and small firms, not tax or legal advice. Rules change; check the source or ask an accountant for your own situation.