Solar VAT zero rating UK 2026: who qualifies, what counts

The 0% VAT rate on energy-saving materials, including solar PV, batteries, solar thermal, heat pumps and insulation, applies to qualifying installations in residential premises in Great Britain until 31 March 2027. After that date the rate reverts to 5% unless HM Treasury extends the relief at a future fiscal event. The relief sits in Group 23 of Schedule 7A to the Value Added Tax Act 1994, and the operating detail is in VAT Notice 708/6.

The relief was introduced at Spring Statement 2022 with effect from 1 April 2022, then extended at Autumn Statement 2023 to cover standalone batteries, water-source heat pumps, and additional ancillary kit from 1 February 2024. Two facts trip up homeowners and installers most often: the relief only applies to qualifying installations, not to a homeowner buying panels off the shelf, and it only applies in a residential context. Get either wrong and the 20% rate comes back into the price.

What the 0% rate actually covers

The relief covers the supply and installation of specified energy-saving materials in residential accommodation or buildings used solely for a relevant charitable purpose. The list is closed. Anything outside the list stays at 20%.

The qualifying materials, as set out in VAT Notice 708/6 (updated February 2024), are:

• Solar photovoltaic (PV) panels and the inverters, mounting and cabling fitted as part of the same installation.
• Solar thermal panels (hot water systems).
• Battery storage, including standalone batteries installed without a new PV system, from 1 February 2024.
• Ground-source, air-source and water-source heat pumps.
• Insulation: loft, cavity wall, solid wall (internal and external), draught proofing, hot water cylinder insulation.
• Wind turbines (microgeneration), water turbines, and certain controls for central heating and hot water systems.
• Boilers fuelled solely by wood, straw or similar vegetal matter.

The catch is that the relief covers the installation contract. A homeowner who walks into a builders' merchant and buys panels to fit themselves pays 20%, because the supply is not bundled with an installation by the same VAT-registered business.

Who qualifies as a customer

Three categories of customer can receive the 0% rate on a qualifying installation.

The first is a domestic residential customer in the UK. That covers owner-occupiers, private tenants commissioning work on their own property, and landlords installing the equipment in property let as a private dwelling. The second is a buyer of new residential property where the installation forms part of the construction, although new-build housing has its own VAT zero-rating route under a different relief. The third is a charity occupying premises used solely for a relevant charitable purpose, which broadly means non-business charitable activity. Sheltered housing, residential care homes and certain mixed dwellings can fall in here. Northern Ireland follows a different track. The Windsor Framework keeps Northern Ireland aligned with EU VAT rules for goods. HMRC confirmed in February 2024 that the 0% rate also applies in Northern Ireland for installations of energy-saving materials, restoring parity with Great Britain after a temporary gap. The legal basis is different but the consumer-facing rate is the same.

What fails the test

The relief is narrow and the failures are predictable. In practice, the most common ones are:

• Commercial premises. A PV array fitted on a warehouse roof or a heat pump in an office block does not qualify. The relief is residential or charitable, not commercial. The supplier charges 20% and the business recovers it through normal VAT input recovery if registered.
• Mixed-use buildings. A flat above a shop is the classic case. HMRC's notice requires the contractor to apportion the work between the qualifying residential element and the non-qualifying commercial element. The residential portion can be zero-rated; the commercial portion stays at 20%. Many installers prefer to skip mixed-use jobs because the audit risk sits on them.
• Supply only. Panels, inverter or battery sold without a fitting contract from the same supplier sit at 20%. This is the rule that trips up DIY installers most often.
• Holiday lets in some configurations. A property let on short-term commercial terms can be argued either way. HMRC's view, set out in updates published February 2024, is that the relief depends on whether the property is "used as a dwelling". A short-term commercial holiday let used purely as a furnished business asset can fall outside.
• Second-hand or refurbished equipment. The relief applies to the supply of qualifying materials. A second-hand inverter resold by a non-registered seller is unlikely to bring the 0% rate with it.

On the ground, the most common error is installers applying 0% to a heat pump in a property that is also part-used as a holiday let or B&B. HMRC's compliance approach has tightened since the relief widened, and the audit trail sits with the installer.

Supply-only versus supply-and-install

The distinction is the heart of the relief and worth a separate beat. The legislation zero-rates the supply of qualifying services that include the installation of qualifying goods, plus the supply of those qualifying goods when made by the same person installing them. The materials only ride on the relief because they are bundled with the installation. Sell them separately and they revert to 20%.

That has two practical effects. First, a homeowner cannot legally split the deal: buy panels at 0% from one trader and pay a different installer to fit them. The supplier is the installer. Second, an installer who sources panels at 20% from a wholesaler can sell the full installation at 0% to the homeowner; the installer recovers their input VAT through normal input recovery, which is why VAT-registered solar installers tend to be cash-positive on materials and bill the homeowner one inclusive zero-rated invoice.

An installer not registered for VAT (under the £90,000 threshold from 1 April 2024) does not charge VAT at all and does not formally apply the relief. The price the homeowner sees is the same in cash terms; the paperwork is different.

What changed in February 2024

The 2024 update closed two gaps in the original 2022 wording. Standalone battery storage retrofitted to a property that already has a PV system was outside the relief between April 2022 and January 2024, because the relief required the battery to be installed at the same time as a PV system. From 1 February 2024, the battery installed alone qualifies in its own right. Water-source heat pumps and diverters were added in the same update.

For a household that put PV in during, say, 2018 and adds a battery in 2025, the relief now applies. For a household that added a battery in 2023 to that same older PV system, the 20% rate applied at the time and is not refunded. There is no retrospective relief.

Worked example: a 4 kWp system in Yorkshire

Take a typical 4 kWp roof-mounted PV system installed in West Yorkshire on a privately owned semi-detached house. Installer quote in May 2026: £7,200 for panels, inverter, mounting, cabling and labour. Add a 5.2 kWh battery at £3,800 inclusive. At 20% VAT, the equivalent gross price would be £13,200. Under the 0% relief, the homeowner pays £11,000.

The £2,200 gap between 0% and 20% is what disappears from the system if HM Treasury allows the relief to expire on 31 March 2027 without an extension.

What happens on 1 April 2027

The default position under VATA 1994 is that energy-saving materials, when bundled with installation, sit at the long-standing 5% reduced rate. The 0% relief was a temporary five-year overlay, extended for further detail in February 2024 but with the same end date of 31 March 2027.

If HM Treasury does nothing, the rate moves to 5% on 1 April 2027, not 20%. Treasury policy papers published alongside Spring Statement 2022 noted the cost of the relief and committed to review before expiry. As of May 2026, no extension has been announced. Industry bodies including the Microgeneration Certification Scheme (MCS) and Solar Energy UK have published submissions calling for extension, but a fiscal event decision is what counts and that has not landed.

A homeowner with a firm installer quote and a fitting date in March 2027 should confirm in writing which rate the installer will apply. The point of supply for VAT is normally the tax point, which for installation services is typically the date of completion or the date of the invoice, whichever is earlier. A signed quote dated in May 2026 with installation in April 2027 may still attract the higher rate if the relief has expired by the invoice date.

Practical interaction with ECO4 and the Boiler Upgrade Scheme

The 0% VAT rate is independent of grant funding. A heat pump installed under the Boiler Upgrade Scheme (BUS) attracts the 0% rate on the homeowner's net contribution, with the BUS grant of £7,500 sitting outside VAT entirely because it is a payment from DESNZ to the installer rather than a supply. Similarly, an ECO4-funded measure attracts 0% on the residential portion of any homeowner contribution, with the ECO4 obligation sitting outside the VAT calculation.

Here is where it breaks. If the installer treats the ECO4 contribution as standard-rated by default and the homeowner discovers later that the residential portion should have been zero-rated, recovery is messy. HMRC's normal four-year refund window applies, and the installer needs to amend their VAT return. Check the invoice carefully before paying.

Scotland and Wales

VAT is a reserved tax. Scotland and Wales follow the same 0% relief as England. Where Scotland diverges is on the funding side: the Home Energy Scotland loan scheme, administered by Energy Saving Trust on behalf of the Scottish Government, can finance the homeowner contribution interest-free up to defined limits. The loan is separate from the VAT relief and does not change which rate applies. The Scottish Government's Heat in Buildings strategy, refreshed in 2024, continues to point homeowners at MCS-certified installers for any measure financed under the loan.

Frequently asked questions

Does the 0% VAT rate apply to DIY solar installs?

No. The relief applies to the supply and installation by the same VAT-registered installer. Panels bought separately for self-install attract the standard 20% rate.

Can a landlord claim the 0% rate on a rental property?

Yes, where the property is let as a private dwelling. A landlord commissioning a qualifying installation for a residential tenant pays 0% on the bundled supply.

Is the 0% rate available in Northern Ireland?

Yes. HMRC confirmed parity from February 2024 under the Windsor Framework arrangements. The same list of qualifying materials applies.

Does the relief cover EV chargers?

No. EV chargers are not on the list of qualifying energy-saving materials. They attract 20% VAT on the supply and install.

What happens if the relief expires in March 2027?

The rate reverts to 5%, not 20%, under the long-standing reduced rate for energy-saving materials. An extension would need a Treasury fiscal-event decision.

Can a homeowner reclaim 20% VAT paid before the relief widened?

No retrospective relief is available. A battery installed standalone in 2023 at 20% remains at 20%. The 0% rate applies only from 1 February 2024.

Sources