VAT on energy-saving materials

Installing energy-saving materials in a home carries VAT at the zero rate until 31 March 2027. HMRC explains the relief in VAT Notice 708/6, and it covers the materials and the work together when one installer supplies and fits them in residential accommodation. A job that would otherwise carry 20% therefore carries nothing. The calculator compares the VAT actually charged with the VAT the same prices would carry at the standard rate; the difference is the relief. An air source heat pump costing £9,000 for the equipment and £3,000 for the fitting saves £2,400.00. The same job invoiced from 1 April 2027 would carry £600.00, because the relief then drops to a reduced rate rather than ending. After the £7,500 grant the heat pump costs £4,500.00. These figures are among the checked cases further down the page.

A zero-rated supply is not an exempt one. It is still a taxable supply, charged at nothing, so a VAT registered installer keeps reclaiming the VAT on its own costs. For the household the effect is simply an invoice without VAT.

HMRC keeps a closed list of the materials that qualify; anything not on it is taxed as usual (VAT Notice 708/6).

• Solar panels, both photovoltaic and solar thermal, as well as wind turbines and water turbines.
• Battery storage and smart diverters, added on 1 February 2024.
• An air source heat pump or a ground source heat pump, and since the same date a water source heat pump, including the groundworks for the ground or water loop.
• Loft insulation, cavity wall insulation and insulation for floors, roofs, walls, hot water tanks and pipes.
• Draught stripping, and heating controls such as thermostatic radiator valves, timers and room thermostats.
• Wood-fuelled boilers and micro combined heat and power units.

A fixed air conditioning unit usually counts as an air source heat pump, since it can heat a room as well as cool it; a portable unit does not. Curtains, carpets and damp proofing products are not on the list.

Yes: both carry the standard rate of 20%, because neither is an energy-saving material in the sense of the relief.

A new gas boiler does not qualify however efficient it is. HMRC treats a whole central heating system built around a gas or oil boiler as a single supply at the standard rate. The controls and pipe lagging fitted with it lose the relief as well. The same system built around a heat pump is one zero-rated supply instead. A boiler job of £2,500 plus £1,500 of labour carries £800.00. Double glazing and replacement windows are standard rated too. For any other price with VAT added or taken out, the VAT calculator does the arithmetic.

The relief follows the installation, so who buys the equipment decides how much of the bill it covers.

When the installer supplies and fits everything, the whole invoice carries no VAT. When a household buys panels or a battery from a shop, the retailer charges full VAT on the goods. Only the fitting then gets the relief. Panels bought for £5,000 and fitted for £1,000 save £200.00, all of it on the fitting. Goods bought for DIY with no installation at all always carry full VAT, so a £3,000 battery costs £3,600.00.

From 1 April 2027 the same installations move to the reduced rate of 5%, which is already law (VAT Act 1994, Schedule 7A).

No extension of the zero rate has been announced. The conditions that applied before 2022 do not come back, such as the 60% test on grant-funded work and the age and benefit tests. Every qualifying installation simply carries 5%. On the heat pump example that means £600.00 of VAT instead of none.

Which rate a job carries depends on its tax point, the earliest of completion, invoice or payment. When the rate changed in 2022, HMRC let a deposit paid before the change keep the old rate while the balance took the new one. A supplier also has some choice over how a deposit is treated, so the rate on work booked before April 2027 and finished later depends on the installer's invoicing.

The Boiler Upgrade Scheme is a grant rather than a tax relief, and it comes on top of the zero rate.

In England and Wales it pays £7,500 towards an air to water or ground source heat pump. When the pump replaces oil or LPG heating off the gas grid, a temporary uplift raises that to £9,000. An air to air heat pump has earned £2,500 since 28 April 2026, and a biomass boiler £5,000 (Department for Energy Security and Net Zero, values from 21 July 2026). Ofgem runs the scheme, which is open until 31 March 2030. The installer must be MCS certified; it applies on the owner's behalf and takes the grant off the price. With the uplift for replacing oil, the example heat pump costs £3,000.00.

The relief applies to residential accommodation across the United Kingdom, and to some buildings used by charities.

Residential accommodation covers houses and flats, care homes, student accommodation, self-catering holiday lets, and caravans or houseboats lived in as a permanent home. Hotels, hospitals and prisons are left out. Since 1 February 2024, buildings used solely for a relevant charitable purpose qualify too. Great Britain has had the relief since 1 April 2022 and Northern Ireland since 1 May 2023; both end on the same day (HMRC, VENSAV2083).

Beyond VAT, there is no income tax relief for a homeowner's energy works. Landlords lost the Landlord's Energy Saving Allowance in 2015. Payments under the Smart Export Guarantee for electricity sent back to the grid are free of income tax. That holds as long as the system was not sized to produce far more than the home uses.

The large figure is the VAT the relief saves against the standard rate, not the VAT on the invoice.

• VAT rate on the installation: the rate the fitting carries, which is also the rate on equipment supplied with it.
• VAT you pay: what the invoice or invoices will show, retail goods included.
• VAT on the same job from April 2027: shown while the 0% rate lasts, for comparison.
• Cost after the grant: the price including VAT less the grant, for heat pumps and biomass boilers fitted professionally.

Two cases are left out: the reduced rate on grant-funded heating for people over 60 or on certain benefits, and larger projects such as an extension. In an extension, HMRC treats the insulation as part of standard-rated building work. Business buyers who reclaim VAT are also outside the calculation. Every price is taken before VAT. The methodology explains how the figures are checked.