What VAT do you pay on insulation, solar panels and heat pumps?

If you are in Great Britain (England, Scotland or Wales) and a contractor installs qualifying energy-saving materials in your home, the VAT rate is currently 0% on those installations. That temporary zero rate runs from 1 May 2023 to 31 March 2027. From 1 April 2027 it reverts to the reduced rate of 5%.

That is set out in VAT Notice 708/6 and on the consumer page VAT on energy-saving products — GOV.UK. Northern Ireland has different rules, which are explained on the consumer page. Use the TipYard VAT checker first if you are not sure which type of work you have, then come back to this guide for the energy-saving detail.

What the 0% rate covers

The relief applies to the services of installing energy-saving materials in residential accommodation and, from 1 February 2024, certain charitable buildings. It also applies when the same business supplies and installs the materials. GOV.UK’s consumer page says that in Great Britain you pay 0% VAT on both certain products supplied by your installer and the cost of the work to install them in your home, if you are eligible.

Notice 708/6 lists the qualifying materials. They include:

• controls for central heating and hot water systems
• draught stripping
• insulation (the consumer page gives examples of insulation on walls, floors, ceilings and lofts)
• solar panels
• wind turbines and water turbines (the consumer page says these qualify in Great Britain only)
• ground source heat pumps and air source heat pumps
• micro combined heat and power units
• wood-fuelled boilers
• from 1 February 2024: water source heat pumps, batteries for storing electricity, and smart diverters

From 1 May 2023 to 31 March 2027 a zero rate also applies to the groundworks necessary for installing ground and water source heat pumps in, or in the curtilage of, residential accommodation and charitable buildings, as described in the notice.

What does not qualify

The relief is about installation. If you supply energy-saving materials without installing them — for example a retailer selling insulation or a solar panel — that supply is standard-rated at 20%. GOV.UK also says you cannot buy or install the products yourself to get the lower rate. Your installer is responsible for charging the correct rate of VAT.

The consumer page lists products that do not qualify, so you pay 20% VAT, including:

• heating equipment that is not funded through an energy efficiency grant
• energy-efficient boilers
• secondary or double glazing
• low-emission glass
• energy-efficient fridge freezers
• wind turbines and water turbines in Northern Ireland

Grant-funded heating equipment is a separate 5% relief

Grant-funded installations of heating equipment are reduced-rated at 5%, not zero-rated, where the conditions in section 3 of Notice 708/6 are met. The consumer page says this can cover installation of heating appliances and the installation, repair and maintenance of central heating or renewable-source heating systems, if the work is funded through an energy efficiency grant and you are eligible. Householder contributions that are not covered by the grant are treated differently in the notice — read section 3.11 if part of the bill is paid from your own pocket.

Northern Ireland

Do not assume the Great Britain 0% rate applies in Northern Ireland. The consumer page sets out a different eligibility test and explains a 60% materials-to-labour threshold that can mean 5% on the whole job, or 5% on labour and 20% on the products. Read VAT on energy-saving products if the property is in Northern Ireland.