VAT for Irish Tradespeople: A Plain English Guide

VAT is the tax topic that generates more confused questions from Irish tradespeople than almost anything else. When do you have to register? What rate do you charge? Can you reclaim VAT on materials? What if you do both labour and supply materials, does that change things?

The rules aren’t as complicated as they seem, but they do need to be understood correctly. Getting VAT wrong creates real problems with Revenue: overcharging it to customers, undercharging it and creating a liability, or not registering when you should and being exposed to back-payments and penalties.

Here’s a plain English walkthrough.

The VAT registration threshold in Ireland

In 2026, the threshold for compulsory VAT registration in Ireland is:

• €40,000 per year for service-based businesses (most sole trader tradespeople)
• €80,000 per year for businesses that primarily supply goods

If your annual turnover from services exceeds €40,000, you are legally required to register for VAT. You must register before your turnover is likely to exceed the threshold, not after. Registering late is a Revenue issue that attracts interest and penalties.

The threshold applies to your total taxable supplies, not your profit. If you turn over €45,000 but your costs are €35,000, you register based on the €45,000 turnover figure.

One important nuance: once registered, you remain registered regardless of whether your turnover subsequently drops below the threshold. You can apply to deregister if turnover falls consistently below €35,000 (80% of the service threshold), but this is a formal Revenue process.

What VAT rate applies to trades work in Ireland?

This is where a lot of confusion sits, and it genuinely matters because charging the wrong rate is a compliance issue.

The reduced rate of 13.5% applies to most construction and building services in Ireland. This includes: general building and construction work, plumbing, electrical installation, roofing, plastering, painting and decorating, carpentry and joinery when installed as part of a building, landscaping and garden services, and repairs and maintenance of buildings and structures.

If you’re a plumber fitting a bathroom, an electrician rewiring a house, or a painter decorating a kitchen, the 13.5% rate applies to your services.

The standard rate of 23% applies to your materials when you sell them separately. If you’re supplying materials as a standalone transaction, not as part of an installation service, the 23% rate applies to those materials. However, if materials are supplied as part of a combined supply of labour and materials for construction work, the whole job (labour and materials) is typically charged at 13.5%.

Zero rate: Certain works to qualifying residential properties may be zero-rated. This is a specialist area and professional advice is warranted if you believe it applies to your work.

There are exceptions and edge cases. If your work doesn’t fit neatly into these categories, getting specific advice is worthwhile.

When voluntary VAT registration makes sense

Registering for VAT before you reach the threshold is allowed and sometimes makes good financial sense.

The argument for voluntary registration is straightforward: once you’re registered, you can reclaim all the VAT you pay on your business purchases: materials, tools, equipment, fuel, professional fees. If your materials spend is significant relative to your turnover, the input VAT reclaim can be substantial.

Example: a tradesperson turning over €35,000 in services, spending €18,000 on materials (at 23% VAT = approximately €3,400 in VAT paid on materials). Voluntary registration would allow reclaiming that €3,400 per year.

The consideration on the other side: once you’re VAT-registered, your prices effectively increase by 13.5% for customers who can’t reclaim VAT, primarily private homeowners. If most of your customers are private individuals and price sensitivity is a concern, this matters.

The voluntary registration calculation works best for tradespeople doing significant work for other VAT-registered businesses or contractors, where the customer can reclaim the VAT you charge and your effective price to them is unchanged.

How to charge VAT correctly on invoices

Once registered, your invoices must include specific information to be compliant:

• Your VAT registration number
• The date of the invoice
• Your business name and address
• The customer’s name and address
• A description of the goods or services supplied
• The VAT rate applied (13.5%)
• The VAT amount charged
• The total amount including VAT

You cannot simply add “plus VAT” to a lump sum. The VAT must be stated separately. Most accounting software (Xero, FreeAgent) handles this automatically once you’ve set up your VAT number and rates correctly.

Invoices must be issued within 15 days of the end of the month in which the supply was made.

Reclaiming VAT on materials and equipment

As a VAT-registered business, you can reclaim the VAT you’ve paid on goods and services used for your business: materials, tools, equipment, fuel for a work vehicle, professional fees, software subscriptions.

The basic rule: you must hold a valid VAT invoice from the supplier to claim the input VAT. Keep your receipts. Digital copies are accepted by Revenue.

You cannot reclaim VAT on personal expenses, food, or entertainment. You can only partially reclaim VAT on items that have mixed business and personal use. A van used solely for business is fully reclaimable; a car with personal use is subject to restrictions.

VAT returns: how often and how to file

Most small businesses file VAT returns bi-monthly (every two months) through Revenue’s Online Service (ROS). For businesses with very low VAT liabilities, annual returns may be available.

The bi-monthly return periods are: January/February, March/April, May/June, July/August, September/October, November/December. Returns are due by the 19th of the month following the end of the period (or the 23rd if filing and paying online through ROS).

Missing a VAT return deadline attracts an automatic surcharge of 5% of the tax due (up to €4,000) after one month, and 10% after two months. It also flags your account for Revenue attention. Filing on time, even if you can’t pay, is better than not filing.

Xero and similar software integrate directly with ROS and can file VAT returns with a few clicks once correctly set up. This removes the risk of manual errors and late filing.

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Need help getting your VAT right?

VAT compliance has real consequences if you get it wrong, and there are genuine planning opportunities if you approach it proactively. Our Fractional CFO for Trades service includes help setting up your accounting correctly and keeping you right with Revenue throughout the year.

Book a free 30-minute call. No commitment required.

Or read next: How to Set Up Xero for Your Trades Business