0% VAT on Solar Panels: How to Claim and What Qualifies

Since April 2022, solar panels, battery storage and other energy-saving materials installed on residential properties in the UK have qualified for 0% VAT instead of the standard 20%. For a typical solar panel installation in Lancashire costing £7,000 before VAT, this saves you £1,400. The zero rate applies automatically – you do not need to fill in forms or apply for a rebate. Your installer simply charges 0% VAT on qualifying installations. Here is exactly what qualifies, what does not, and how the saving works in practice.

This VAT reduction is one of the most significant financial incentives for home energy improvements available to Lancashire homeowners. It applies alongside other schemes like the government heat pump grant and the export tariff, meaning you can stack multiple benefits. Understanding the rules ensures you get the full saving you are entitled to.

What Qualifies for 0% VAT

The following energy-saving materials and installations qualify for the zero VAT rate when installed on a residential property:

• Solar panels (photovoltaic): All rooftop and ground-mounted solar PV systems
• Solar thermal panels: Hot water heating solar systems
• Battery storage: When installed with or retrofitted to a solar panel system
• Air source heat pumps
• Ground source heat pumps
• Water source heat pumps
• Insulation materials: Loft insulation, cavity wall insulation, solid wall insulation, underfloor insulation and draught stripping
• Heating controls: Thermostatic radiator valves, thermostats, programmers and other heating control devices
• Wind turbines and water turbines
• Biomass boilers
• Combined heat and power (micro-CHP) units

The zero rate covers both the materials and the labour for installation. This is important – even if you buy the materials separately and hire someone to install them, the labour element should also be zero-rated (provided the installer is VAT-registered and the work is on a qualifying product for a residential property).

What Does Not Qualify

Not everything related to energy improvements is covered. The following are still charged at the standard 20% VAT rate:

• EV chargers: Home electric vehicle chargers do not qualify for the zero rate. They are charged at the standard 20% VAT rate.
• Gas boilers: Replacement gas boilers are standard-rated at 20% VAT (or 5% if installed by a VAT-registered plumber as part of a wider energy efficiency package – but this is complex).
• Double or triple glazing: Window replacements are not classified as energy-saving materials under this scheme.
• Smart meters: Installed for free by your supplier, so VAT is not relevant.
• Commercial properties: The zero rate only applies to residential dwellings, not offices, shops or industrial buildings.
• Standalone battery storage: A battery installed without any link to a solar panel system may not qualify. The battery should be installed alongside or connected to a solar PV system to be eligible for zero VAT.

How the Saving Works in Practice

The saving is straightforward. Here are some examples for typical Lancashire installations:

• 10-panel solar system (4kW): Cost before VAT: £6,500. At 20% VAT: £7,800. At 0% VAT: £6,500. Saving: £1,300.
• Solar system plus 5.2kWh battery: Cost before VAT: £9,500. At 20% VAT: £11,400. At 0% VAT: £9,500. Saving: £1,900.
• Air source heat pump: Cost before VAT: £11,000. At 20% VAT: £13,200. At 0% VAT: £11,000. Saving: £2,200 (note: you also get up to £7,500 in government grants on top of this).
• Loft insulation top-up: Cost before VAT: £500. At 20% VAT: £600. At 0% VAT: £500. Saving: £100.
• External wall insulation: Cost before VAT: £10,000. At 20% VAT: £12,000. At 0% VAT: £10,000. Saving: £2,000.

You do not need to do anything to claim the saving. Your installer applies 0% VAT on their invoice instead of 20%. If an installer quotes you a price including 20% VAT for a qualifying product on a residential property, they are either making an error or are not aware of the scheme. Ask them to check HMRC’s guidance on energy-saving materials (VAT Notice 708/6).

How Long Does the Zero Rate Last?

The 0% VAT rate on energy-saving materials was introduced in April 2022 and is currently set to continue until at least 31 March 2027. After that date, the rate will revert to 5% (the reduced rate that applied previously) unless the government extends the zero rate.

If you are planning a solar panel installation, heat pump or insulation project, completing it before March 2027 ensures you benefit from the full zero rate. There is no indication yet whether the zero rate will be extended beyond 2027, though there is industry pressure to make it permanent.

The Property Requirements

The property must be a residential dwelling for the zero rate to apply. This includes:

• Houses and flats (owner-occupied or rented)
• Park homes (residential mobile homes on licensed sites)
• Houseboats used as a main residence
• Buildings that contain only residential accommodation

For mixed-use properties (e.g., a shop with a flat above), the zero rate applies only to the residential part. The installer should apportion the costs appropriately.

Prior to the current rules, there was an additional restriction based on whether the installation was a “social policy condition” (linked to benefits or age). This has been removed – the zero rate now applies to all residential properties regardless of the owner’s income, age or benefit status.

Combining 0% VAT with Other Incentives

The zero VAT rate stacks with other incentives. For a Lancashire homeowner installing a heat pump:

• Total installation cost: £12,000
• VAT saving (0% instead of 20%): £2,400
• government grant: £7,500
• Your net cost: £2,100

For solar panels with a battery:

• Total installation cost: £9,500
• VAT saving: £1,900
• export tariff income: £100-£300 per year
• Electricity bill savings: £400-£600 per year
• Effective payback period: 7-10 years (accounting for all benefits)

Our guides to the government heat pump grant and solar panel battery storage in Lancashire explain these other incentives in detail.

What if my installer charged 20% VAT?

If you have already paid 20% VAT on a qualifying installation (completed after 1 April 2022), you may be able to reclaim the difference from the installer. Contact them and ask them to review the VAT treatment. If the installation qualifies for the zero rate, they should issue a corrected invoice and refund the overpaid VAT. If the installer is uncooperative, seek advice from your local advisory service or HMRC.

Does the 0% VAT apply to DIY solar panel purchases?

The zero rate applies to the supply and installation of qualifying materials. If you buy solar panels from a supplier and install them yourself, the supplier should still charge 0% VAT on the panels. However, the zero rate is clearest and most straightforward when applied to a complete supply-and-install contract. If you are doing a partial DIY installation, ensure the supplier is aware of the VAT position.

Does it apply to second homes or holiday lets?

The zero rate applies to any residential dwelling, including second homes and holiday lets, provided the property is used primarily as a residence. A furnished holiday let or Airbnb property that is a residential dwelling qualifies. A commercial holiday park with lodges or static caravans may qualify if the lodges are residential in nature. Check with your installer and, if in doubt, with HMRC.