VAT on solar panels and heat pumps: 0% until 31 March 2027

Installing solar panels or a heat pump in a home in Great Britain is zero rated for VAT. The 0% rate has applied since 1 April 2022 and runs until 31 March 2027. From 1 April 2027 the rate reverts to 5%.

The dates that matter

• 1 April 2022. Installation of qualifying energy-saving materials in homes in Great Britain becomes zero rated.
• 1 May 2023. The zero rate is extended to Northern Ireland.
• 1 February 2024. Batteries and water-source heat pumps are added, along with buildings used solely for a relevant charitable purpose.
• 31 March 2027. The last day of the zero rate. From 1 April 2027 the rate is 5%.

As an example of scale only, on a £12,000 heat pump installation the VAT is nil at the zero rate, £600 at 5% and £2,400 at the standard rate. That is not a figure for your project.

HMRC's guidance is VAT Notice 708/6.

What the relief covers

The relief covers a fixed list of materials. Solar panels, heat pumps, insulation and electrical storage batteries are on it, among others. If a product is not on the list, it does not qualify, however efficient it is.

It applies to residential accommodation and, since 1 February 2024, to buildings used solely for a relevant charitable purpose. Commercial buildings are not covered. Solar panels on an office, shop or warehouse are 20%.

Our energy-saving materials page gives the broader picture.

What people get wrong

• "Solar panels are VAT free." Only when installed. The relief is for installation, so panels, a heat pump or a battery bought on their own are 20%.
• "Anything energy efficient qualifies." The list is fixed. Efficiency alone is not the test.
• "It includes insulation, so the whole job is 0%." An extension or a general refurbishment does not become zero rated because some insulation goes in with it.
• "The rate is settled." As the law stands, it changes to 5% on 1 April 2027.

In a new build home, solar panels and heat pumps fitted by the contractor are simply building materials in a zero-rated build. The energy-saving relief is not needed.

Where it goes wrong

• Whether the product is actually on the list, or only sounds as if it should be.
• Whether the contract is for installation, or for goods with the fitting arranged separately.
• Where the installation ends and the surrounding building work begins.
• A job priced at 0% that may run past 31 March 2027.

Each of these can turn an expected 0% into 20%, or the other way round.

The sensible next step

Where an installation is part of a larger project, the answer depends on how the work is contracted and what else the project qualifies for. Send us the builder's quote and we will tell you whether there is anything worth pursuing. The fee is fixed and agreed first, and where the answer is 20% we will say so.