VAT on solar panels and heat pumps to be cut to zero

Over the next five years, the government will eliminate VAT on energy-saving residential measures such as solar panels, insulation, and heat pumps. 

“Homeowners who have solar panels, heat pumps and insulation installed will no longer pay 5 per cent VAT – they will pay zero,” Chancellor Rishi Sunak said. Sunak claimed the revisions were possible “due to Brexit” while announcing the policy in his Spring Statement. The reason for this not happening sooner, according to Sunak was due to the EU previously blocking tax cuts on the installation of home energy saving measures. 

In a letter to the Chancellor earlier this week, MPs stated that increasing energy efficiency is the most effective way to cut family energy costs amid the current energy crisis.

The United Kingdom has some of Europe’s draughtiest homes, resulting in increased energy expenditures and greenhouse gas emissions. More than 19 million households in the UK have an energy efficiency rating of band D or lower. 

Experts suggest that plugging draughts and moving from gas boilers to heat pumps are required to reduce the UK’s dependency on gas and fulfil climate targets.

Wind turbines and hydroelectric projects will also be eligible for the zero per cent rate of VAT, under the plans. 

According to him, “A family having a solar panel installed will see tax savings worth over £1,000 and savings on their energy bill of over £300 per year.” To calculate your current Energy Bills visit here. 

Homes will benefit from zero VAT on energy efficient measures for the next five years as the scheme is to start in April 2022 and will last until 2027.

Labour’s shadow chancellor Rachel Reeves told the Commons the measures announced were not enough to reverse the worsening cost of living crisis, and failed to “provide real help to families”.

She said: “Today was the day that the Chancellor could have put a windfall tax on oil and gas companies to provide real help to families, but he didn’t.

This all comes as the UK sees a huge Energy Crisis, with experts like Martin Lewis citing the 54% or £693 rise in energy bills as “catastrophic” and Britain already more than a quarter of the way through assessing another rise on October 1. In the midst of this Wholesale Gas prices have hit huge highs and many energy suppliers have collapsed as a result.