UK governments slashes VAT for residential PV, heat pumps to 0%

The UK government announced it will reduce the value-added tax (VAT) applied to heat pumps and solar modules used in residential applications from 5 to 0%.

The new measure will come into force on April 1, 2022. “The zero-rate will be available for a period of 5 years and will then revert to the 5% reduced rate of VAT,” the government said in a statement. “This measure will positively impact individuals through lower prices charged by energy-saving materials (ESMs) installers, subject to the degree to which these businesses pass the VAT savings on to their customers.”

Wind and water turbines were also added back to the list of the ESMs eligible for the VAT reduction.

“Solar Energy UK is delighted to see VAT reduced on solar and other energy saving materials for residential use, after many years of calling for this,” said the association's CEO, Chris Hewett. “It is common sense for the Treasury to be encouraging greater uptake of all zero carbon technologies in the face of an energy security crisis and climate emergency. It will be seen as a real endorsement of solar, as well as improving the pay back for many consumers who may be on the fence.”