Cut VAT on extensions and repairs

Building extensions should be reduced VAT, just like building new homes is

Housebuilding companies just pay 5% Value Added Tax when they build new homes – cutting the costs by 20% (the current rate of VAT). The government justifies this – and the HomeOwners Alliance supports it – on the grounds that we need to encourage housebuilding to overcome the housing shortage.

But another way of overcoming the housing shortage is to encourage people to extend the living space in their homes. Increasing a one bedroom home to a two bedroom one by converting the attic or attaching a new bedroom at the back can turn a property only suitable for a couple into a home for families with children. But unlike housebuilders, if you extend your house in this way, you have to pay VAT, increasing the costs by 20%. This tax on building new bedrooms makes it too expensive for many homeowners to consider extensions.

Building work done by homeowners that increases the living space of a home should be treated the same as building a new home – it should be VAT free. And builders who undertake this type of work should have the same perks as housebuilders.

We have written to the planning minister, Nick Boles, to respond to the government’s consultation on permitted development rights. We took this opportunity to again raise the issue of cutting VAT on extensions click here to read our letter

We have joined the Cut the VAT campaign, alongside dozens of other organisations and wrote to the Chancellor on this issue.  See our press notice.

Have you been put off building an extension or converting an attic because of VAT? If so we would like to hear from you. Or, better yet, email your MP.

 

Related reads

Government must slash refurb VAT to boost economy by £15 billion
Calls for cut in VAT on repairs as homeowners batten down the hatches

 

I am a single parent who works for peanuts after tax and national insurance is taken out. I am appalled that I have to pay VAT on an extension I want to build. It is a small single storey extension and the VAT is preventing me on having the work done. The £4500 tax charged for VAT on the quote means I would not be able to afford a kitchen to go into the extension. Its a shame because the sacrifices my daughters and I have made to save money to extend the kitchen has all been in vain. The savings I have already been taxed, so to tax them again is ludicrous.

  • 20% VAT for extending a house to a modern family home, when there is such a shortage of housing and housing prices are so high is very unfair. We are intend to renovate farm cottages, but for the price of the renovation we can almost buy a new home, with land.

    When you look at the QS figures for the house, and cannot understand why it will cost so much and is such an inefficient choice – the answer is in the 20% tax.

    The tax damages the financial advantage for families to improve the housing stock, and shuts another door to those seeking a solution to family living space in such an inflated market. It’s a nonsense when developers of new builds do not pay the tax at all.

  • we are currently looking to build a single floor extension on our terraced house but the cost of the Vat is putting it beyond our means. we can not afford to move house so are stuck with our small house

  • At least an extension will ultimately increase the house value. But why should VAT be charged for “invisible” but important renovation work such as new joists, rewiring, etc. Surely this is contributing to Britain’s housing stock.

  • I am confident that VAT reduction on extensions / renovations will boost the economy / employment in the country without loss of revenue to the chancellor.
    More and more jobs will be directed towards established / registered companies rather than builders working for cash, significant non-registered builders avoid income tax probably claiming state benefits.
    My current extension project (a fairly common example) can be completed either £22000 or £26400. What a Choice I have! Educated assessment is that the total material cost for this project is under £5000, rest is wages and profit.
    This business requires serious considerations; need to establish process / procedures.
    May be chancellor and his team do not time for this important and popular demand in our country.

  • we live in a 3 bed semi and have become legal guardians for 2 of our grand children we need to extend. we still have 2 younger daughters living with us.
    the cost of extending is approximately 30,000,
    with additional costs for our grandchildren money is at a premium as we are approaching pensionable age. the vat on building work is a major concern.
    i feel an unfair tax.as we do not claim anything for the grandchildren from this government. they should be helping people in this matter and reduce the vat as the same for newly built property.

  • Dear Tony,

    Thanks for your comments and we agree that VAT is a huge additional cost for homeowners who are carrying out home improvements! Please keep an eye on our news section: HOA’s Voice for details of any press notice or campaigns we start on this or other issues relevant to homeowners.

    Kind regards,

    Sophie
    HomeOwners Alliance Team

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