VAT on Solar Panels Is Rising on 1 April 2027: What UK Homeowners Need to Know

Quick facts at a glance

• Current rate: 0% VAT on eligible installations in residential accommodation
• Rate from 1 April 2027: 5% (the reduced rate)
• Relief introduced: 1 April 2022 in Great Britain, extended to Northern Ireland on 1 May 2023
• Last day at 0%: 31 March 2027
• Extension announced? Not as of September 2026, according to the House of Commons Library
• What is covered: solar panels, home batteries, heat pumps, insulation, smart diverters and more
• What is not covered: EV chargers, double glazing, most business premises, and materials bought without installation

What is changing, and why?

In April 2022 the government introduced a temporary zero rate of VAT on the installation of energy-saving materials in homes. Before that, most solar installations were charged at the 5% reduced rate. The zero rate was always time-limited. It is written into law until 31 March 2027, after which supplies of this kind revert to the 5% reduced rate. So this is not a new tax. It is the scheduled end of a temporary relief.  

Could the 0% rate be extended beyond March 2027?

Only by new legislation. The end date is written into the orders that created the relief, so the government would have to bring forward further legislation to keep the zero rate going. The House of Commons Library says that, as of September 2026, ministers have not indicated they plan to do so, even though MPs have tabled several written questions on the subject. The government has also not signalled that it will widen the relief to other technologies, such as heat batteries. The Treasury originally estimated that the zero rate would cost between £45 million and £65 million a year in Great Britain between 2022/23 and 2026/27. Extending the relief to batteries, water source heat pumps and diverters was estimated to add £5 million in 2023/24, rising to £25 million by 2028/29. Those are the sort of figures a Chancellor weighs at a Budget, so a last-minute extension cannot be ruled out. It also cannot be relied on.  

How much extra will I pay after 1 April 2027?

VAT at 5% is charged on the net price of the installation. As a guide: These are illustrations only, not quotes. Your actual figure depends on system size, battery capacity, roof type and any extras. You can get a personalised price range with our solar panel calculator or see our prices page.  

Which products and services are affected?

Under HMRC's rules, the following are currently zero-rated when installed in eligible buildings, and will move to 5% in April 2027:

• Solar panels, including photovoltaic (PV) panels with cabling, control panel and inverter, and solar thermal systems
• Home batteries, including standalone batteries and those retrofitted to existing solar (added to the relief from 1 February 2024)
• Smart diverters, which send spare solar power to your hot water or other appliances (also added from 1 February 2024)
• Heat pumps: air source, ground source and water source
• Wind and water turbines
• Insulation, draught stripping, and heating and hot water controls
• Wood-fuelled boilers and micro combined heat and power units
• Groundworks needed for ground or water source heat pumps

What counts as a qualifying battery?

To qualify, a battery must be intended solely for storing energy from electricity supplied to the building or generated by a microgeneration system such as solar panels. This is why a battery can qualify whether it is fitted with new solar or retrofitted later, but a battery bought from a retailer without installation is still charged at 20%. Our battery storage page explains the options.  

Which buildings qualify?

The zero rate applies to installations in residential accommodation, which includes houses, flats, care homes, hospices, student accommodation, self-catering holiday accommodation, and permanently occupied park homes and houseboats. Since 1 February 2024 it also covers buildings used solely for a relevant charitable purpose, such as village halls. It does not apply to hospitals, prisons, hotels or similar establishments, and it does not generally apply to commercial premises. If you are a business, our solar for business team can explain how VAT applies to your project.  

What is not covered by the relief?

This is where people are often caught out. The following are standard-rated at 20% today and are not affected by the April 2027 change:

• Materials bought without installation. If a retailer sells you solar panels or a battery and you do not have them installed by that same supplier or a contractor, the sale is standard-rated. The zero rate applies to the installation service, or to a supply-and-install package.
• Other energy-efficient products, such as double glazing, low-emissivity glass and energy-efficient appliances. The government has said windows and doors do not qualify because their primary purpose is not improving energy efficiency and saving carbon emissions.
• EV chargers. These are not on HMRC's list of energy-saving materials, so check the VAT treatment on your quote. See our EV charging page for details.

Does it matter when I sign, pay or have the system installed?

Possibly, and this is the question most homeowners ask. VAT is generally charged at the rate in force at the tax point. For installations that is usually when the work is completed, but it can be earlier if an invoice is issued or a payment is received beforehand. HMRC has specific rules for rate changes, including protections against schemes designed purely to avoid the higher rate. The safest approach is simple:

1. Get your survey and quote done early.
2. Ask your installer, in writing, how VAT will be treated on your contract, including deposits and stage payments.
3. Aim to have your system installed and commissioned before 1 April 2027, rather than relying on timing tricks.

If you have a complex situation, take advice from an accountant.  

Why you should not leave it until March

Even if the VAT change were the only factor, there are practical reasons not to wait for the last minute:

• Grid approval takes time. Your district network operator (DNO) may need to approve the connection, and customers regularly tell us this step can take a while and is outside an installer's control.
• Scaffolding, equipment and diary slots. Demand tends to rise ahead of a deadline. Later slots may be harder to get.
• You start saving sooner. Every month your system is running is a month of lower bills and export income.

A sensible target is to book your survey by the end of 2026, which leaves comfortable room for design, approval and installation before the deadline.  

Is solar still worth it with 5% VAT?

Yes. A 5% increase changes the upfront cost modestly, but the case for solar rests on the savings over 25 years or more. Here is how the pieces fit together:

• Lower bills. Electricity you generate and use at home is electricity you do not buy from the grid.
• Battery storage. A battery lets you store daytime solar for the evening, and can also take advantage of cheap overnight tariffs.
• Export income. Surplus power can be sold back to the grid through a smart export tariff.
• Property value. Analysis of more than five million property sales by Solar Energy UK suggests solar can add value to a typical home.

The extra £250 to £600 is best viewed against those long-term returns. It slightly extends the payback period, but it does not change the overall picture for most households. Our solar for home page has more detail.  

What about grant-funded heating?

A separate rule applies to grant-funded installations of certain heating equipment for qualifying people (for example, those aged 60 or over, or receiving specified benefits). These are charged at 5% and are unaffected by this change. If a supply also counts as an energy-saving material installation, the zero rate currently takes priority until 31 March 2027.  

A short history of VAT on solar panels

 

Frequently Asked Questions

This article is for general information and is not tax advice. VAT treatment depends on your individual circumstances, so please confirm details with your installer, HMRC or an accountant.