FMB says £876m of Scottish home improvement work on hold ahead of Budget VAT call

Homeowners in Scotland are delaying £876m of building work a year because they cannot find a builder they trust, the Federation of Master Builders (FMB) said on 22 October as it urged the Chancellor to reform VAT in next week's Budget.

The trade body said the figure is Scotland's share of £11.2bn of work put off across the UK each year. It comes from research by the FMB and the HomeOwners Alliance, which found one in five homeowners had put off work in the last five years because they could not find a trusted or quality builder.

The FMB said VAT is set at Westminster, so the Budget applies directly to Scottish homeowners. HM Treasury confirmed in a letter to the Treasury Select Committee, published on 31 July, that the Budget will be held on 28 October 2026.

Mark Macdonald, director of O'Mac Construction in Stornoway on the Isle of Lewis, said: "Eight out of ten tender returns are coming in above budget and end up shelved or redesigned." He added that on community-led projects, where funding is tight, VAT is a constant battle and removing it would help some of them move forward.

The VAT position

According to the FMB, domestic electricity has been VAT-free since 1 October, but VAT remains at 20% on labour for general home improvement work. The exception is some energy efficiency installations, which are charged at 0%; the FMB said this relief is set to end in March next year.

The legislation sets out the position in slightly different terms. The explanatory note to the 2024 Order on legislation.gov.uk says the zero rate on installing energy-saving materials in Great Britain applies until 31 March 2027, with a reduced rate applying from 1 April 2027.

The electricity relief the FMB contrasts with is itself temporary. HM Revenue & Customs (HMRC) said the zero rate on domestic electricity, announced on 21 July 2026, has effect from 1 October 2026 to 31 March 2027 and applies only to supplies made in Great Britain. Before the change, VAT on domestic fuel and power was charged at the reduced rate of 5%, HMRC said.

The FMB said energy efficiency installations are often coupled with general household upgrades, leaving builders with a complex invoice trail to work out what is exempt from VAT and what is not. It wants the Chancellor to simplify and extend relief on home improvements beyond energy efficiency measures.

Gordon Nelson, FMB Scotland director, said: "Reforming and simplifying VAT relief for housing improvement work will stimulate demand across all four nations of the UK."

Five Budget asks

VAT relief is one of five measures the FMB is calling for in the Budget. The others are a UK-wide network of Build Academies and administrative support for small firms taking on apprentices, faster planning for small housebuilders, development finance that small housebuilders can easily access, and funding for mandatory licensing of domestic building companies.

The same joint research also found support for licensing. The HomeOwners Alliance said 82% of UK homeowners would be willing to pay more for licensed builders with mandatory competence levels, and 68% said mandatory licensing would increase their confidence in builders. It put the number putting off work because they could not find a builder they trust at 19%.

Both licensing and apprenticeships feature in the FMB's Builders' Manifesto for Scotland 2026, published on 11 November 2025, which calls for a mandatory licensing scheme to raise standards and protect consumers and for investment in training and apprenticeships.

The release follows the FMB's response to the Chancellor's September speech, in which it said housing delivery had stalled over the past year against the government's 1.5 million homes target.

What happens next

Nelson said the FMB expects more detail on how the Apprenticeship Accelerator Grant will help local builders train apprentices at the Scottish Budget in December. The UK Budget is on 28 October.