UK Government Scraps VAT on Solar Panels and Heat Pumps

Chancellor Rishi Sunak has announced VAT on energy saving products, such as solar panels and heat pumps, has been scrapped to zero for the next five years.

Since 2011, the cost of solar panels has dropped by a staggering 50% and could save homeowners £330 a year on energy bills. That’s a whopping £6,600 over 20 years.

The news comes as part of the Spring Statement and will come into effect April 2022 until 2027. It will apply to the installation of the following energy saving products:

• Solar Panels

• Ground Source Heat Pumps

• Air Source Heat Pumps

• Insulation

• Controls for Central Heating and Hot Water Systems

• Draught Stripping

• Micro Combined Heat and Power Units

• Wood-fuelled Boilers

Energy saving products are currently on a VAT rate of 5%.

The removal of this VAT could help encourage British homeowners to buy low-carbon products, which will not only see the reduction of energy bills, but also decrease household carbon emissions.

Mr Sunak claims that families who have solar panels installed could see tax savings worth around £1,000.

Why Is The Government Cutting VAT?

The reason for the cut is part of a wider cause to help homeowners during the energy crisis. Investing in solar panels or heat pumps could help people significantly cut back on gas and electricity bills.

Unfortunately, the Government did announce Northern Ireland would not be receiving the VAT reduction. However, Mr Sunak did state that funding arrangements would be made to match the VAT decrease.

Solar Panels, Insulation or Heat Pumps?

There are many benefits of an air source heat pump including the government grant for air source heat pumps that offers up to £5,000 off the cost of heat pumps.

However, research suggests that solar energy is the cheaper and more efficient green energy solution.

Insulation is also worth considering as an uninsulated roof can account for a quarter of heat loss in your home. By insulating your loft, attic or flat roof, you are effectively minimising heat loss and therefore reducing your heating bills. If you’d like to know more you can read our complete guide to loft insulation.

Summary

The Government has started to make positive steps to reduce the impact of rising gas prices on homeowners.

Solar panels are already helping households save on energy costs but this VAT reduction is going to help people save even more money, in what is, unquestionably, a financially tough time for homeowners.

Solar panels can also add value to your home and can make your property more attractive to buyers.

Many are hoping that this is just the start of more positive actions taken by the UK Government.