On 1st January 2011 Value Added Tax (VAT) went up from 17.5% to 20%. For most people considering expensive building renovations, the VAT increase is bad news – but it need not be.
The real cost of VAT
The increase in VAT rate will certainly be felt by those planning home improvements. An average £20,000 house extension would have cost £23,500 including VAT on December 31st 2010. However on 1st January 2011 the same project would cost £24,000 in total – that’s an extra £500 over night!
No VAT on our labour
But the tax increase need not be the nail in your project’s coffin. At Oliver Gibbs Carpentry & Joinery we are under the VAT threshold. This means that customers do not have to pay VAT for our labour, only materials. As labour is often the most expensive cost in building projects, considerable saving can be made by employing a business like ours.
For example, suppose 65% of your £20,000 loft conversion comes from labour costs. With our firm the total cost of your work including VAT would be £21,400. Employ a firm above the VAT threshold and you will pay £24,000 all inclusive. By simply using our Shrewsbury carpenters you have made a saving of £2600 – which you could put towards a brand new kitchen!
Other VAT exemptions
And there are other ways in which you can save on VAT. Certain environmental and disabled building projects are exempt from VAT. For example, VAT is zero rated for altering a building to suit a disabled person or building a new house to current standards. Other works are eligible for a reduced rate of VAT. This includes converting a building into a house or flat, and renovating or altering an empty house flat. In these cases, you can claim some or all of the tax back. For more information, visit the HM Revenue & Customs website, and do get advice from your tax office before work starts.
VAT rates may have gone up, but you can still get carpentry work done at a great price with Oliver Gibbs Carpentry & Joinery. Contact us for a free, no obligation quote.