Autumn Budget 2026: what it means for extensions and small builders

Published 31 October 2026

What changed

Sources: HM Treasury, Budget 2026; FMB, 28 October 2026; Inside Housing, 29 October 2026; Travers Smith.

VAT: no cut for home improvements

The Federation of Master Builders (FMB) had asked for a VAT cut on home improvement work, at least where it includes energy-efficiency measures. It did not get one. In its response on 28 October, the FMB said the relief should cover whole improvement jobs, not only the specific installations whose zero rate ends next March.

Five days before the Budget, the FMB published research suggesting homeowners in the North of England put off £2.5 billion of building work a year because they cannot find a builder they trust. In the same release its members argued that a lower VAT rate would bring some of that work forward. Rob Clark, who runs a building firm in Blackpool, said: “At the standard rate, a £50,000 extension carries £10,000 of VAT.”

For the coming year the position is unchanged. A builder who is VAT-registered charges 20% on an extension. A builder whose turnover is under the £90,000 registration threshold charges no VAT, so always check whether a quote includes it before comparing prices.

Installing qualifying energy-saving materials in an existing home, such as loft or cavity wall insulation, a heat pump, solar panels or a battery, is zero-rated until 31 March 2027 and then due to go to 5%. HMRC treats insulation and other energy-saving materials built into a new extension as part of one standard-rated job, so pricing them on a separate line does not make them zero-rated. Separate work on the existing house can qualify. If that applies to your project, ask the installer or an accountant how the timing of invoices and payments around 31 March affects the rate. The earlier insight on the Construction Jobs Plan covers the relief in more detail.

Building Regulations: no major changes, except for safety

In his speech the Chancellor, John Healey, said: “No major changes to building regulations in this Parliament, except where it is critical to safety.” The Budget does not say what counts as a major change. Building safety work, including the Grenfell Tower Inquiry recommendations, carries on. Building regulations are devolved, so the promise covers England but not Wales or Scotland.

It is a policy commitment, not a change in the law, and it does not cancel rules already made. The amendment regulations bringing in the Future Homes Standard were made in March 2026, and most of them take effect on 24 March 2027. The biggest changes are for new homes, including a requirement for on-site renewable electricity such as solar panels. The updated Approved Document L, the guidance on energy efficiency, also covers work to existing homes, so an extension notified to building control on or after 24 March 2027 is assessed against the new edition. Ask your designer whether that changes the insulation or glazing specification on your drawings.

Work notified before 24 March 2027 can stay under the current rules if it starts before 24 March 2028. That applies to building notices, full plans applications and initial notices from approved inspectors, and on a site with several houses it applies to each house separately.

For a homeowner, the result is that once the drawings are approved, the rules are unlikely to change again before the extension is built. A small builder doing extensions and refurbishments has fewer changes to keep up with after March.

Wages: the rise from April

The National Living Wage for workers aged 21 and over goes from £12.71 to £13.21 an hour on 1 April 2027. The rate for 18 to 20-year-olds goes to £11.27. Apprentices under 19, or in their first year, are on the separate apprentice rate. The headline rates of employer National Insurance are not changing. FMB chief executive Brian Berry said: “For small building firms operating on tight margins, a further increase will be difficult to absorb.”

Skilled trades are rarely paid at the minimum, and many labourers are self-employed or already earn more. Where a firm does employ a labourer on the minimum for 39 hours a week, the rise is £19.50 a week in wages, or about £25 once employer National Insurance, pension and holiday pay are added. Over a ten-week single-storey extension that is roughly £250. The bigger effect may be staff just above the minimum asking to keep their gap over it.

Materials have moved more. Across all construction work, materials were 6.4% dearer in August than a year earlier, with fabricated structural steel up 21.2% and rigid pipes and fittings up 15.5%. The steel prices insight has the full figures.

Fuel, vans and equipment

The planned fuel duty rise in January has been cancelled, and the 5p cut and freeze now run to 1 July 2027. The red diesel cut is also extended, but construction plant has had to run on white diesel since April 2022, so that one does not help builders.

Most small firms claim 100% relief on vans and plant through the £1 million Annual Investment Allowance, so the change to the first-year allowance (40% to 50% from 1 January 2027) matters only to firms spending more than that. The cut in the writing-down allowance from 14% to 12% from April 2027 slows the relief on what is already in a firm’s plant and machinery pool. Double-cab pick-ups are treated as cars and get neither. If you are buying a van or plant soon, ask your accountant whether to buy before or after 1 January.

Landlords

Landlords in England, Wales and Northern Ireland will pay 24% on property income at the basic rate from 6 April 2027, 44% at the higher rate and 49% at the additional rate. That combines last year’s two-point rise, which had not yet started, with another two points announced in this Budget. Repairs and improvements are treated differently for tax, so take advice before a refurbishment between tenancies.

Inflation and borrowing

The Office for Budget Responsibility, the official forecaster, expects inflation to peak at 3.8% in early 2027 and return to the 2% target in the third quarter of 2028. Inflation was 3.5% in September. The Bank of England’s next interest rate decision will be announced on 5 November. For anyone borrowing to pay for an extension, the mortgage rate is likely to affect the total cost more than anything in this Budget, so speak to a broker before signing with a builder.