When to Register for VAT as a Construction Business

Zubair Aslam
Jul 30
6 min read

Updated: 6 days ago

Key Takeaways

You must register for VAT once your taxable turnover exceeds £90,000 in any rolling 12-month period — or if you expect to exceed it in the next 30 days alone.
You must tell HMRC within 30 days.
New-build work is zero-rated but still counts towards the threshold. A new-build subcontractor can be required to register despite charging customers no VAT — and registering then lets them reclaim VAT on materials. (Most renovation and repair work is standard-rated, so this doesn't affect those trades.)
Because of the domestic reverse charge, registering for VAT as a subcontractor (which usually means you start charging VAT on top) won't make a you more any expensive to VAT-registered contractors than you already are, whilst allowing the you to reclaim VAT on relevant business expenses.
You can apply to deregister if turnover falls below £88,000.

The compulsory threshold: £90,000

The VAT registration threshold is £90,000 of taxable turnover, measured on a rolling 12-month basis. "Rolling" is the part that catches people out: you're not looking at your tax year or the calendar year, but at any consecutive 12-month period. So at the end of every month, you check your taxable turnover for the previous 12 months, and if it's over £90,000, you're required to register.

There are actually two tests, and you register if either is met:

The backward test: your taxable turnover over the past 12 months has exceeded £90,000. You must notify HMRC within 30 days of the end of the month you went over, and registration takes effect from the first day of the second month after that. For example, if you exceeded £90,000 in the 12 months ending 31 May, you notify by 30 June and are registered from 1 July.
The forward test: you expect your taxable turnover to exceed £90,000 in the next 30 days alone — typically a single large contract win. Here you must register straight away, effective from the date you became aware.

What counts as "taxable turnover" — and the construction catch

This is where construction differs from most industries. Taxable turnover is the value of all your VAT-taxable supplies — and that includes standard-rated (20%), reduced-rated (5%), and zero-rated (0%) work. It is not your profit, and it is not your total receipts.

The crucial point: zero-rated work counts. New-build residential construction is zero-rated so they count towards the £90,000 threshold. That means a new-build specialist can be required to register even though they charge their customers no VAT at all. Far from being a problem, that's usually an advantage — once registered, they can reclaim the VAT on their materials, plant, and fuel while still charging 0% on their work, which typically leaves them owed money by HMRC each quarter.

To be clear about who this affects: it's specifically new-build trades. If you work on existing buildings — repairs, extensions, renovations, maintenance — your work is standard-rated at 20%, so this particular catch doesn't apply to you and your turnover behaves like any other business's. Zero-rating is the everyday reality for subbies on new-build housing sites, and largely irrelevant to everyone else.

Only exempt supplies — mainly the sale or lease of existing buildings and land — fall outside taxable turnover and don't count towards the threshold.

One more trap: your turnover figure includes the materials you charge on to customers, not just your labour. A subcontractor invoicing labour plus materials can cross £90,000 sooner than they'd expect from their take-home alone.

Should you register voluntarily?

You can register at any turnover, with no minimum. For most trades the rule of thumb is simple: register voluntarily if your customers are mainly VAT-registered businesses (who reclaim the VAT anyway), and don't if they're mainly consumers (for whom your prices would jump 20%). Construction bends that rule because of the domestic reverse charge:

Your main customers	Voluntary registration?
VAT-registered contractors (reverse charge applies)	Often worth it. Under the reverse charge you don't add VAT to their invoices anyway, so registering doesn't make you any more expensive — and you can reclaim VAT on materials, tools and fuel.
New-build / zero-rated work	Usually beneficial. You may have to register anyway as zero-rated turnover counts, and you reclaim input VAT while charging 0%.
Private homeowners (standard-rated, B2C)	Usually not worth it. Adding 20% either makes you more expensive than unregistered competitors or eats into your margin.

The reverse-charge point is the one worth dwelling on. If you mainly work for VAT-registered contractors, being registered doesn't cost you any competitiveness — the reverse charge means you weren't going to add VAT to their bills either way — but it does let you recover the VAT on everything you buy. On the other hand, there is more admin: once registered you must file quarterly VAT returns and operate the reverse charge correctly, but this won't be an issue if you have a construction accountant to do it all for you.

How to register, and what happens next

You register online through HMRC (or your accountant does it for you). You'll receive a VAT number and an effective date of registration, and from that date you must charge VAT (or apply the reverse charge) and can reclaim input VAT. Registration also brings you into Making Tax Digital for VAT, so you'll need compatible software to keep digital records and file quarterly returns.

Registering late — and deregistering

If you register late, you're liable for the VAT from the date you should have registered — even if you never charged it to customers, which can mean paying it out of your own pocket — plus a penalty. Monitoring your rolling 12-month figure each month is the way to avoid that.

If you're already registered and your taxable turnover drops below the £88,000 deregistration threshold, you can apply to cancel your registration. Bear in mind you may owe VAT on business assets you keep worth more than £6,000 in total (the "deemed supply" rule).

Frequently Asked Questions

When do I have to register for VAT? Once your taxable turnover exceeds £90,000 in any rolling 12-month period, or when you expect to exceed £90,000 in the next 30 days alone. The rolling test is checked at the end of each month against the previous 12 months, not your tax year. If you cross it on the backward test, you must notify HMRC within 30 days of the end of that month.

Does zero-rated construction work count towards the VAT threshold? Yes. Zero-rated work, such as building new dwellings, is still a taxable supply, so it counts towards the £90,000 threshold. This means a new-build subcontractor can be required to register even though they charge customers no VAT — and registering is usually an advantage, because it lets them reclaim the VAT on their materials while still charging 0%. This only affects new-build trades; work on existing buildings is standard-rated and behaves normally.

Should a subcontractor register for VAT voluntarily? It depends who you work for. If your customers are mainly VAT-registered contractors, the domestic reverse charge means you don't add VAT to their invoices anyway, so registering doesn't make you more expensive — and you can reclaim VAT on materials and tools, which often makes it worthwhile. If you mainly work for private homeowners, registering usually makes you 20% pricier, so it's rarely worth it.

What happens if I register for VAT late? You become liable for the VAT from the date you should have registered, even if you didn't charge it to your customers — so you may have to pay it out of your own pocket — and HMRC can charge a penalty on top. Because the threshold is a rolling 12-month figure, it's worth checking your turnover at the end of each month so a late registration doesn't creep up on you.

Can I deregister from VAT if my turnover drops? Yes. If your taxable turnover falls below the £88,000 deregistration threshold, you can apply to HMRC to cancel your VAT registration. Be aware that on deregistration you may owe VAT on business assets you keep that are worth more than £6,000 in total, under the deemed supply rule.

Not sure whether — or when — to register?

VAT registration in construction isn't a simple turnover check: zero-rated work, the reverse charge, and your customer mix all change the answer, and getting the timing wrong can leave you paying VAT you never charged. Talk to the SiteLedger team on 0161 513 0027 and we'll tell you whether you need to register, whether it's worth doing voluntarily, and handle the whole process. As construction accountants, VAT in the building trade is what we deal with every day.

Written by the SiteLedger team — construction-specialist accountants. Last reviewed: July 2026. Figures apply to the 2026/27 UK tax year. This is general guidance, not personal tax advice; VAT decisions depend on your specific circumstances, so speak to us before you register or deregister.