Is there VAT on Solar Panels?Why has the Government Introduced 0% VAT?Are Solar Batteries included?Do You Need to Apply for the VAT Exemption?Are there any Exceptions to 0% VAT?How Much Money Could You Save with 0% VAT?What Other Green Solutions Benefit from 0% VAT?Other Ways to Save on Solar PanelsFinance OptionsVAT on Solar Panels FAQs
Is there VAT on Solar Panels?Why has the Government Introduced 0% VAT?Are Solar Batteries included?Do You Need to Apply for the VAT Exemption?Are there any Exceptions to 0% VAT?How Much Money Could You Save with 0% VAT?What Other Green Solutions Benefit from 0% VAT?Other Ways to Save on Solar PanelsFinance OptionsVAT on Solar Panels FAQs
✔ There is currently 0% VAT on solar panel installations for residential properties in the UK.
✔ This 0% VAT rate applies to both the cost of solar panels and their installation, as well as to solar storage batteries.
✔ The 0% VAT rate is temporary, lasting until March 31, 2027, after which it will increase to a reduced rate of 5%.
The landscape of solar panel taxation in the United Kingdom has undergone significant changes in recent years and now offers homeowners an unprecedented opportunity to invest in renewable energy.
The UK government's strategic decision to zero-rate VAT on solar panel installations represents a landmark moment in promoting sustainable energy solutions.
This policy not only makes solar technology more financially accessible but also signals a strong commitment to supporting the transition towards greener, more environmentally friendly power generation.
In this article, we'll look at the UK's current VAT policy on solar panels in detail, as well as other schemes you can take advantage of to help you save money.
Currently, there is no VAT on solar panel installations for residential properties in the UK. This zero-rate VAT policy was introduced in April 2022 for England, Scotland, and Wales, and extended to Northern Ireland from May 2023. The 0% VAT rate applies to both the cost of solar panels and their installation.
The VAT exemption on solar panels in the UK is set to last until 31 March 2027. After this date, the VAT rate on solar panel supplies will increase to a reduced rate of 5% from 1 April 2027.
This change aligns with the UK government's financial and renewable energy goals, ensuring that even after the exemption ends, solar panels remain more affordable than they were before the introduction of the zero-rate VAT policy.
The UK government introduced a 0% VAT rate on solar panel installations as part of a broader initiative to promote renewable energy and sustainability. This policy aims to make solar panels more affordable for homeowners thereby encouraging the adoption of renewable energy sources.
By reducing the upfront cost of solar installations, the government hopes to accelerate the transition towards cleaner energy and help households reduce their energy bills amidst rising energy prices.
The zero-rate VAT policy is also aligned with the UK's commitment to achieving net-zero carbon emissions by 2050. By incentivising the installation of energy-saving materials, such as solar panels and batteries, the government seeks to reduce the country's carbon footprint and enhance energy security.
This initiative is part of a comprehensive strategy to support green technologies and ensure a sustainable future for the UK.
Yes, solar batteries are included in the VAT exemption policy. The UK government has extended the VAT relief to cover both solar panels and solar storage batteries:
Solar batteries installed alongside solar panels have been eligible for the 0% VAT rate since the policy's introduction in April 2022.
As of February 1, 2024, the VAT exemption has been expanded to include standalone battery installations and retrofitted batteries.
The inclusion of solar batteries in the VAT exemption policy aims to encourage greater energy self-sufficiency in UK homes and promote the adoption of energy storage solutions.
No, you do not need to apply separately for the 0% VAT exemption on solar panel installations. This exemption is automatically applied when purchasing and installing new solar panels on residential properties, provided certain conditions are met.
The key criteria include using a certified installer, such as those approved by MCS. This automatic application of the VAT relief simplifies the process for homeowners which makes it easier to benefit from reduced costs associated with transitioning to renewable energy sources.
While the UK government's 0% VAT policy on solar panels and batteries offers significant savings, there are specific exceptions where this rate does not apply:
Secondhand materials: The 0% VAT rate only applies to brand new solar panels and batteries. Secondhand or used materials are subject to the standard VAT rate of 20%.
Separate purchases and installations: If solar panels are purchased from one supplier and installed by another, the standard VAT rate of 20% applies to the purchase. This means that to benefit from the 0% VAT, both the purchase and installation must be done through the same certified supplier.
Commercial installations: The zero-rate VAT is specifically for residential properties. Commercial installations do not qualify for the 0% VAT and are subject to the standard VAT rates.
Maintenance and repairs: Any maintenance or repair work conducted after the initial installation is subject to the standard VAT rate of 20%.
DIY installations: Installations carried out by non-certified individuals or as DIY projects do not qualify for the 0% VAT rate unless the installer is MCS-certified.
These exceptions highlight the importance of adhering to specific criteria to fully benefit from the government's VAT relief on solar energy systems.
The 0% VAT rate can lead to substantial financial benefits for homeowners investing in solar technology. According to Sunsave, for a typical 3.5 kilowatt peak (kWp) solar and battery system in a three-bedroom home, the savings are significant:
Total System Cost: Approximately £9,000 with 0% VAT.
Previous Cost with 20% VAT: Roughly £10,800.
Potential Savings: Around £1,800.
The 0% VAT rate applies to a range of energy-saving materials and technologies beyond solar panels.
These include ground and air source heat pumps, insulation materials, wind and water turbines, and controls for central heating and hot water systems. Also, the tax relief covers micro combined heat and power units, wood-fuelled boilers and draught stripping.
This comprehensive list of eligible products demonstrates the government's commitment to promoting energy efficiency and sustainable living across various aspects of home improvement and renewable energy adoption.
When considering the installation of solar panels, there are several additional ways to save money beyond the 0% VAT exemption.
These programs and solar grants can further reduce upfront costs and enhance the long-term financial benefits of transitioning to renewable energy. Here are some key options to explore:
The ECO4 scheme offers significant savings for low-income households. Under this program, eligible homeowners can receive partially or fully funded solar panel installations. The scheme runs until March 2026, providing an opportunity for substantial cost reductions on solar panel systems.
The Smart Export Guarantee allows solar panel owners to earn money by exporting excess energy back to the grid. This ongoing scheme can provide additional savings on top of the energy bill reductions from solar panel use.
Solar Together is a group-buying scheme that can lead to significant discounts on solar panel installations. By joining with other homeowners in your area, you could save on the upfront cost of solar panels.
For homeowners considering solar panel installation, various finance options are available to make the investment more accessible.
Such options include personal loans which provide flexibility in terms of loan amount and repayment schedule. Solar leases allow homeowners to benefit from solar energy without the upfront costs, though they may not reap the full financial benefits of ownership.
Buy now, pay later schemes are increasingly popular, offering interest-free periods to spread the cost over time.
When exploring these options, it's crucial to obtain a comprehensive solar panel quote that includes potential financing arrangements, ensuring you can compare the total cost of ownership across different payment methods.
The current 0% VAT rate on solar panel installations further enhances affordability. Remember that while financing can make solar more attainable, it's essential to carefully consider the long-term implications of each option.
Currently, there is no VAT on solar panels installed on residential properties in the UK.
The 0% VAT rate on solar panels is set to last until 31 March 2027.
From 1 April 2027, the VAT rate on solar panel supplies is expected to revert to a reduced rate of 5%.
Yes, commercial installations, secondhand panels and separate purchases are typically subject to the standard VAT rate.
Yes, as of February 2024, the 0% VAT rate applies to both solar batteries installed with solar panel systems and standalone storage batteries.
The 0% VAT rate applies to England, Scotland, Wales and Northern Ireland, although Northern Ireland's implementation started in May 2023.
No, maintenance and repairs after the initial installation are subject to the standard VAT rate.
The 0% VAT rate also applies to wind and water turbines, heat pumps, insulation materials, micro combined heat and power units, wood-fuelled boilers and central heating.
