Spring Budget 2025: Energy Measures That Affect Lancashire Homeowners
The Spring Budget 2025 contains several measures that directly affect energy costs, home improvements and green technology for Lancashire homeowners. From continued VAT relief on energy-saving materials to adjustments in vehicle excise duty for electric cars, the budget signals both continued support for the green transition and new financial realities for households making energy decisions. Here is what the key announcements mean in practical terms for homes across Lancashire and Greater Manchester.
0% VAT on Energy-Saving Materials Extended
The 0% VAT rate on energy-saving materials and their installation has been confirmed to continue beyond its original end date. This covers insulation (loft, cavity wall, solid wall, floor), heat pumps, solar panels, battery storage, heat pump hot water cylinders, and draught-proofing materials when installed by a VAT-registered contractor. For a typical Lancashire heat pump installation costing £12,000, this 0% rate may save an estimated £2,000 compared to the standard 20% VAT rate. For a £6,000 solar panel installation, the saving is £1,000.
The extension provides certainty for Lancashire homeowners planning energy improvements. There had been concern that the rate might revert to 5% or 20% if not extended, which would have significantly increased costs. The continuation means there is no urgency to rush improvements to beat a deadline, allowing proper planning and comparison of quotes.
Electric Vehicle Taxation Changes
From April 2025, new electric vehicles will pay the standard rate of Vehicle Excise Duty (road tax) for the first time – £190 per year, the same as petrol and diesel vehicles. Previously, EVs were exempt. For existing EV owners, this change applies from the next renewal date after April 2025. It removes one of the financial incentives for EV ownership, though the running cost advantages remain significant.
Company car benefit-in-kind (BIK) rates for EVs increase from 2% to 3% for the 2025/26 tax year. For a 40% taxpayer with a £35,000 company EV, this adds approximately £11 per month to the BIK tax bill. While the rate is increasing, it remains vastly below the 28% to 37% BIK rates for equivalent petrol cars, making EVs still overwhelmingly attractive as company vehicles for Lancashire commuters.
The budget did not introduce any new EV purchase grants, and the previous plug-in car grant for private buyers remains discontinued. However, the Workplace Charging Scheme (up to £350 per socket for business premises) and the EV chargepoint grant for renters and flat-dwellers (up to £350 per charger) continue.
Energy Price Cap and Bill Support
The budget confirmed that the energy price cap mechanism will continue as the primary consumer protection against volatile energy prices. No additional energy bill support payments (such as the £400 Energy Bills Support Scheme from 2022) were announced, suggesting the government considers current prices manageable for most households.
The winter energy discount scheme continues at £150 for the 2025/26 winter, with eligibility criteria remaining broadly unchanged. pension top-up benefits recipients are automatically eligible, and other low-income households can apply through their energy supplier. For Lancashire’s fuel-poor households, this remains the most accessible direct bill support.
winter fuel support payment eligibility remains restricted to those receiving pension top-up benefits or certain other means-tested benefits, following the controversial change in 2024. Lancashire has approximately 280,000 people over state pension age, and the restriction is estimated to have removed the payment from around 200,000 of them. For those who have lost the payment, applying for pension top-up benefits (if eligible) unlocks not just the winter fuel support payment but a range of other benefits worth significantly more.
Green Home Improvement Funding
The government heat pump grant continues with its government grant (currently up to £7,500, subject to eligibility) for heat pumps, confirmed through to March 2028. The budget allocated additional funding to meet growing demand, addressing the monthly cap issues that caused delays in 2024. Lancashire homeowners should find it easier to secure a voucher without the previous waiting periods.
government energy efficiency schemes and government insulation scheme funding continues through their planned end dates (government energy efficiency schemes to March 2026, government insulation scheme to March 2026). The budget did not announce successor schemes, creating some uncertainty about what follows. Industry bodies are lobbying for long-term replacement programmes to maintain momentum in the home insulation sector.
A new green skills initiative was announced, with £100 million allocated to training heat pump installers, energy assessors and retrofit coordinators across England. Lancashire’s colleges, including Burnley College, Preston’s College and Lancaster & Morecambe College, are expected to benefit from this funding, increasing the local supply of qualified green construction workers.
Property Taxation and Energy Efficiency
The budget did not introduce any direct link between energy efficiency and council tax or stamp duty, despite lobbying from green building organisations. However, the government reiterated its commitment to the EPC C minimum for private rental properties by 2030, which will effectively create a financial incentive through reduced rental income for non-compliant landlords.
For Lancashire landlords, this deadline is now five years away. Given that improving a typical East Lancashire terrace from E to C can take six to twelve months (including assessment, grant applications, and installation), landlords with multiple properties need to start planning immediately to avoid a last-minute rush as the deadline approaches.
Carbon Pricing and Energy Bills
The UK Emissions Trading Scheme (ETS) cap was tightened in the budget, which will gradually increase the cost of carbon-intensive energy generation. While this primarily affects industrial emitters, the cost filters through to consumer energy prices over time. The direction of travel is towards higher carbon costs, which will make gas relatively more expensive and strengthen the financial case for electrification (heat pumps, induction cooking, EVs).
The government also signalled its intention to consult on rebalancing green levies between electricity and gas bills. Currently, green levies on electricity add approximately £150 to the average bill, while gas levies are minimal. Shifting some of these levies to gas (or to general taxation) would make electricity relatively cheaper and gas relatively more expensive, directly benefiting heat pump owners while increasing costs for gas boiler households.
No timeline was given for this rebalancing, and it remains a consultation rather than a firm commitment. But Lancashire homeowners considering a heat pump should be aware that the financial case for switching is likely to improve in the coming years as energy pricing evolves.
What Lancashire Homeowners Should Do
The budget reinforces the same message as previous years: the government is supporting a transition to low-carbon homes through grants, tax breaks and regulation, and this transition will continue regardless of who is in power. Lancashire homeowners who invest in energy efficiency and renewable technology now will benefit from current funding, VAT relief, and the longest possible period of reduced running costs.
Specific actions to take based on the budget: Claim the government grant before its budget is used up (extended to 2028 but not indefinite). Apply for government energy efficiency schemes or government insulation scheme insulation before these schemes end in 2026. Install solar panels and heat pumps while 0% VAT applies. Consider an EV before BIK rates increase further. And if you are a landlord, start planning your rental property improvements now to meet the 2030 EPC C requirement.
Has the energy price cap changed in the budget?
The budget did not change the price cap mechanism, which continues to be set quarterly by the energy regulator based on wholesale energy costs. The Q2 2025 cap is expected to decrease slightly from the Q1 level. No additional bill support payments were announced, as the government considers current energy prices to be more manageable than the crisis levels of 2022-2023.
Is it still worth buying an EV after the road tax change?
Yes. The £190 per year road tax adds a modest cost, but EVs remain significantly cheaper to run than petrol cars overall. The fuel saving alone (approximately £1,000 to £1,400 per year for a typical Lancashire driver) far outweighs the road tax. Company car drivers still benefit from the very low BIK rate (3% in 2025/26 versus 28%+ for petrol). The running cost advantage of EVs is barely dented by the tax changes.
Will there be new energy grants after government energy efficiency schemes and government insulation scheme end?
The budget did not announce successor schemes to government energy efficiency schemes and government insulation scheme, both of which are scheduled to end in March 2026. Industry expectations are that replacement programmes will be announced, but their scope and funding levels are uncertain. Lancashire homeowners should apply for current schemes before they close rather than waiting for potentially less generous future programmes. The government grant for heat pumps is confirmed until 2028.
