Is the extra cost of VAT on solar panels a major reason that’s stopping you from making your home more energy-efficient?
If the answer is yes, you may be pleasantly surprised to learn that since April 2022, VAT on energy-saving equipment has dropped to 0%. This will last through to 31st March 2027!
In the following article, we’ll explore what these significant changes in VAT policy mean to you. And why now could be the perfect time for environmentally conscious households across England, Scotland, Wales and Northern Ireland to begin a renewable solar energy journey!
Understanding VAT on Solar Panels
Value Added Tax (VAT) is a consumption tax added to most UK goods and services at each stage of production or distribution. The standard rate is 20%. However, to support certain industry sectors, such as hospitality and tourism, a lower rate of 5% is applied.
For several years, the Renewable Energy Sector has also benefited from this reduced tax rate. Although helpful in numerous ways, many households pay an extra cost when purchasing energy-efficient equipment such as solar panels.
Recognising that VAT may be harming the uptake of renewable energy in UK homes, the former Conservative government introduced a complete cut in 2022. It was also hoped this measure would counteract the trend in rising energy price caps, improve domestic energy efficiency, and keep overall household energy costs down.
Is There any Special Criteria to Claim 0% VAT on Solar Panels?
To claim 0% VAT on solar panels and relevant equipment, they must be:
- installed on residential properties or buildings that are used for charitable purposes.
- new and not second-hand.
- fitted by a MCS-registered installer.
- bought and installed with the same provider or a 20% VAT charge could be incurred.
What Does a VAT-Free Solar Energy System Include?
If you invest in a solar energy system, it’s not just the panels that benefit from 0% VAT. The tax cut applies to everything that comes as part of the package! This includes equipment and materials such as:
- Solar collectors
- Pipework
- Circulation systems
- Pumps
- Storage cylinders
- Control panels
- Heat exchangers
- Cables
- AC/DC inverters
Did you know you may be entitled to free solar panels and equipment through current Government Schemes?
How Much Does a Solar Energy System Cost in 2025?
The current cost of a full solar system in 2025 ranges from £5,000 to £15,000. This depends on the number of panels included and the wattage of electricity it generates. The 0% VAT Relief is already applied to these prices. After March 2027, the prices will rise again to include a 5% VAT increase. This means, based on current prices, customers will be paying hundreds of pounds more for the same system in the future.
Is Solar the Only VAT Free Renewable Energy?
Since February 1st 2024, many other energy-saving materials and equipment installed in residential properties are now eligible for the 0% VAT cut.
These include:
- Controls for central heating and hot water systems – manual or electronic timers, thermostats, mechanical or electronic valves and thermostatic radiator valves.
- Draught stripping – for windows, exterior and interior doors and loft hatches.
- Insulation – for walls, floors, ceilings, roofs or lofts, water tanks, pipes and other plumbing fittings.
- Wind turbines – including equipment necessary for operation, such as mounting poles, electrical cables, battery banks and voltage controllers.
- Water turbines – including equipment necessary for operation, such as electrical cables, battery banks and voltage controllers.
- Ground source heat pumps – includes preparatory ground work carried for installation,
- Air source heat pumps – these must be permanently fixed or non portable/moveable units.
- Micro combined heat and power units – these produce heat and hot water as well as electricity.
- Wood-fuelled boilers – includes hoppers that are integral to the installation of the boiler.
- Water source heat pumps – includes the preparatory dredging of a body of water to install pipework or equipment necessary to operate the pumps.
- Batteries for storing energy converted from electricity – includes the retrofitting of batteries that store electricity generated by systems such as solar panels, wind turbines, water turbines or which are part of microgeneration systems. This also includes the installation of standalone batteries that store electricity from the grid.
- Smart diverters – includes the retrofitting of smart diverters to microgeneration systems so that electricity can divert to appliances in the home, including other energy-generating devices such as heat pumps.
Take Advantage of Zero VAT on Solar Panels now!
There’s never been a financially better time for households to invest in renewable energy and save on future fuel bills. If you want to save £100s on solar panels, grab your opportunity now, as this VAT break won’t last forever! Did you know that there are solar packages available which include solar panels and batteries for as little as £50 a month with zero to pay up-front? Click the button below to find out more!
VAT on Solar Panels FAQs
There is currently no VAT on solar panels fitted on residential properties in England, Scotland, Wales and Northern Ireland. This was introduced in April 2022 and will remain in place until 31st March 2027.
Martin Lewis’s opinion about solar panels is generally a positive one. Please follow this link for further information.
If you’ve found that your electricity bills haven’t dropped much since having solar panels installed, you may need to add more panels to your system. You should also take advantage of the free energy generated during the day. Running electric appliances such as dishwashers and washing machines at this time can really make a difference.
If solar panels are fitted to private residential properties, the income is tax-free. However, if you are a business or landlord that rents out accommodation, this will be classed as taxable income.
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