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How quoting and job pricing works in the United Kingdom

In the UK the document you send before a job is a quote (or estimate). Strictly, a quote is a firm, fixed price the customer can hold you to, whereas an estimate is a best-guess figure that may change as the work is scoped. In everyday trade language the two words are used loosely, but it pays to say which you are giving: a fixed-price quote reassures a homeowner, while an estimate protects you when the full extent of the work is not yet known.

A good UK quote is built from the ground up. You cost the labour (usually in hours or days at a rate), the materials, and the expenses such as travel, skip hire, waste disposal or hosting. That total is your cost. On top of that you add your profit, either as a markup on cost or as a target margin on the selling price, plus a contingency to cover the unknowns. Only then do you deal with VAT. Presenting the quote as clear line items, with a subtotal, contingency, VAT and total, is what separates a professional builder or agency from someone who has scribbled a lump sum on the back of a business card.

How VAT applies to your quotes and estimates

VAT is the single thing most UK quotes get wrong. The standard rate is 20%, with a reduced rate of 5% for a few categories such as certain energy-saving materials and some residential conversions, and a zero rate (0%) for a small number of items including most new-build residential construction. The rate you charge depends on what you are supplying, not on who you are.

Presentation matters just as much as the rate. When you quote a business (B2B), show prices net, that is ex-VAT, because a VAT-registered business reclaims the VAT and cares about the net figure. When you quote a consumer (B2C), show prices gross, that is inclusive of VAT, because the price they pay is what they judge you on. Best practice on any quote is to show all three lines clearly: the net subtotal, the VAT amount, and the gross total, so there are no nasty surprises when the invoice lands.

Not every business charges VAT. You only have to register once your VAT-taxable turnover goes over the registration threshold of £90,000 in a rolling twelve-month period. Below that you can trade without adding VAT at all, which lets many sole traders and small builders quote lower gross prices to homeowners. If you are not registered you must not show VAT on your quote or pretend to charge it. Once you cross the threshold, or register voluntarily to reclaim input VAT, every quote needs the correct VAT treatment applied.

A worked example: pricing a job in pounds, step by step

Imagine a small building job. You price two days of a skilled tradesperson at £45 an hour and a day of a labourer at £22 an hour, buy £3,000 of materials, and expect around £300 in skip hire and waste. Here is how the numbers build up into a finished quote.

1. Labour: a skilled tradesperson for 40 hours at £45 = £1,800, plus a labourer for 24 hours at £22 = £528. Total labour £2,328.
2. Materials: £3,000 at cost. Trades typically mark materials up by 20–30%, so at 25% that becomes £3,750 on the quote.
3. Expenses: travel, skip hire and waste of £300. Direct cost total so far: £2,328 + £3,750 + £300 = £6,378.
4. Profit: apply a markup on labour and expenses. A 20% markup on the £2,628 of labour and expenses adds roughly £526, giving a pre-contingency price of about £6,904.
5. Contingency: add 10% to cover the unknowns on a renovation, about £690, taking the net price to roughly £7,594.
6. VAT: as a VAT-registered builder quoting a homeowner, add 20% VAT of about £1,519, for a gross total of around £9,113 inclusive of VAT.

Markup, margin and contingency: what the numbers should be in the UK market

Markup and margin are not the same thing, and confusing them is the fastest way to under-price a job. Markup is a percentage added on top of your cost: cost of £100 plus 30% markup gives a £130 price. Margin is the share of the selling price that is profit: a £130 price with £100 of cost is a margin of about 23%, not 30%. A 50% markup is only a 33% margin. Decide up front which basis you are quoting on and stick to it.

Contingency is your buffer for the things you cannot see when you quote, such as rot behind a wall, ground conditions or scope creep. On predictable work 5–10% is normal; on renovations and older properties 10–20% is more realistic. It protects your margin rather than adding to it.

• Extensions and larger building work run at roughly £2,200–£3,200 per square metre inclusive of VAT, before finishes, depending on region and specification.
• Trades typically mark materials up by 20–30% and labour by 10–30%, aiming for an overall net margin of about 10–20% on the job.
• Freelance and web day rates commonly sit around £300–£400 a day, or roughly £40–£70 an hour, with rates higher in London and the South East.
• Small website builds for a sole trader or small business typically come in between £1,500 and £4,000 depending on scope and content.
• Add contingency of 5–10% for straightforward work and 10–20% for renovations, older buildings or anything where the full scope is uncertain.

VAT rates and official sources

Use the correct VAT treatment for what you are supplying and always confirm the current rates and thresholds with HMRC before you send a formal quote. The links below go to the official guidance.

• Standard rate 20% — applies to most goods and services, including most building work and professional services.
• Reduced rate 5% — applies to a limited list such as certain energy-saving materials and some residential conversions and renovations of empty homes.
• Zero rate 0% — applies to a small number of supplies including most new-build residential construction.
• VAT registration threshold: £90,000 of VAT-taxable turnover in a rolling twelve months; below this you can quote without VAT.
• Official VAT rates and categories: gov.uk VAT rates (HMRC).
• Turn a finished quote straight into a compliant invoice with the UK invoice generator, and cost your own or a subcontractor's time with the UK salary calculator.
• Pricing a job abroad? Try the US project cost calculator or the Australian project cost calculator for local tax and rates.

Local specifics generic tools ignore

Generic estimate tools built for other markets miss what actually drives a UK quote. The dominant use here is construction and renovation, from extensions and loft conversions to kitchens and bathrooms, followed by trade job-pricing for electricians, plumbers, decorators and joiners, and then freelance and agency work for web, design and consulting. Each has its own quoting habits, and this calculator ships with templates for building, web and consulting so you start close to your trade.

Regional variation is large and real. A day of skilled labour or a builder's square-metre rate in London and the South East can be a third to a half higher than the same work in the North or in Wales, so a rate that wins work in one region can price you out or leave money on the table in another. Materials pricing has also been volatile in recent years, which is exactly why a stated contingency and a clear valid-until date on your quote matter more than they used to.

Freelancers and small agencies quote differently from trades. A freelancer usually prices on a day rate or fixed project fee and, if under the £90,000 threshold, may not charge VAT at all, which makes them look cheaper to VAT-registered clients who cannot reclaim anything. Agencies almost always quote net plus VAT to business clients and price on margin across a blended team rate. Whichever camp you are in, the discipline is the same: itemise, apply markup or margin deliberately, add contingency, and show VAT correctly.