Home › Guides › VAT on energy-saving materials

VAT on energy-saving materials: zero rated until March 2027

Written by J.W. van Stiphout

The supply and installation of energy-saving materials in residential property is zero rated for VAT. It runs until 31 March 2027 and then goes back to the reduced rate of 5%. It applies across the United Kingdom, Northern Ireland included — that last part changed on 1 May 2023 and a lot of material online still says otherwise.

Source: HMRC VAT Notice 708/6, consulted 28 August 2026. Check it before you rely on it; reliefs move.

What is covered

• Air source, ground source and water source heat pumps
• Solar panels, both photovoltaic and thermal
• Batteries for storing electricity
• Wind and water turbines
• Insulation to walls, floors, roofs and pipework
• Heating controls — thermostats, thermostatic radiator valves
• Smart diverters

Since February 2024 it also covers buildings used for a relevant charitable purpose, not only homes.

The groundworks for a ground source or water source heat pump are zero rated too — the digging, the trenches and the boreholes needed to put the collector in, in the property or in its curtilage. On a ground source job that is often a third of the quote, so putting it on the standard rate costs the customer thousands. Notice 708/6 states it in its own section; it is not an inference from the heat pump itself.

The date is a trap in three places

On a £12,000 installation the difference between 0% and 5% is £600. That figure turns up in three places where nobody is looking for it.

• A quote with a long validity period that gets accepted after the date. Whose £600 is it?
• A calculator or configurator with the rate written into it, which will be quietly wrong from 1 April 2027 onwards.
• A staged job that starts before and completes after. The rate follows the tax point, so whatever is invoiced or paid before the change carries the old rate — invoice the completed stage before 1 April 2027.

The first one is easy to fix and worth fixing now: a line in your standard quote terms saying the price assumes the current VAT treatment and will be adjusted if it changes before the work is carried out. That sentence costs nothing today and settles an argument in 2027.

Zero rated is not the same as exempt

Zero rated work is still taxable work at a rate of nothing. You still record it, it still counts towards your turnover, and you can still reclaim the VAT on what you bought to do it. Exempt work behaves differently. If you find yourself with a lot of zero-rated output and normal-rate input, you may end up reclaiming more than you pay — which is a good problem and a reason to talk to your accountant about return frequency.

One job, two rates

A heat pump install that also involves remedial work to the existing system can carry both treatments on the same invoice. That is the practical argument for the VAT rate living on the line rather than on the document: one setting per invoice forces somebody to split the job into two, and then to remember why.

Two rules about the invoice itself that catch people out

The first is the £250 line. Below it you may issue a less detailed VAT invoice — name, address and VAT number, the time of supply, a description, and per rate the total including VAT. Above it you owe the full set. The trap is in that word: the £250 is the consideration including VAT, not the net figure. A £220 job at 20% is £264 and needs the full invoice, which is not what most people assume when they read "250".

The second is currency. You may price and invoice in euros or dollars if that suits the customer — the amounts excluding VAT may be in any currency — but the total VAT chargeable has to be shown in sterling on the same document. One line in pounds on an otherwise euro invoice looks odd and is exactly what the rules ask for.

Source for both: the VAT Regulations 1995, regulation 16A for the £250 threshold and regulation 14 for what a full VAT invoice must show. We cite the regulations rather than the guidance notice deliberately — the notice is longer, and on these two points the regulation is the one that actually says it.

What this does not tell you

It does not tell you whether a particular product on a particular job qualifies, and the edges are genuinely narrow. The notice is the authority; your accountant is the one who should read it against your job. What is worth taking from here is the shape: zero now, five from April 2027, everywhere in the UK, and a sentence in your quote terms in the meantime.