VAT on solar panels, heat pumps and insulation from April 2027

What is changing on 1 April 2027?

The zero rate on fitting energy-saving materials ends after 31 March 2027. It was always temporary, and the date it ends was set in law when it started. VAT Notice 708/6 says: From 1 April 2027 onwards, supplies of installations of energy-saving materials will revert to the reduced rate of VAT of 5%.

The relief itself stays: the same jobs in the same homes simply move from 0% to 5%. If you are VAT registered and fit these materials, invoices and VAT returns use the new rate for work with a tax point (explained below) on or after 1 April 2027.

Which installs get the relief?

Installs of the materials on HMRC’s list, in homes and in buildings a charity will use only for its non-business work or as a village hall or similar community building. In HMRC’s words, The relief applies to the services of installing energy-saving materials in residential accommodation and charitable buildings. When you supply the materials and fit them, both are covered, and so are small jobs that only support the install: cutting a new loft hatch to lay loft insulation is part of the insulation job. The list:

• Insulation for walls, floors, ceilings, roofs and lofts, and for water tanks and pipes
• Draught stripping around windows, doors and loft hatches
• Controls for central heating and hot water, such as timers, thermostats and radiator valves
• Solar panels, both solar thermal and solar PV with the cabling and inverter
• Batteries that store electricity, retrofitted or standalone
• Air source heat pumps
• Ground and water source heat pumps, including the groundworks to lay their pipes
• Wind and water turbines
• Micro combined heat and power units
• Wood-fuelled boilers
• Smart diverters added to solar panels or turbines

Batteries, water source heat pumps and smart diverters were added on 1 February 2024. Heat batteries are due to join the list from 1 April 2027 (the government says it will make regulations for this).

Homes include flats, student accommodation, park homes and self-catering holiday lets, but not hotels, inns, hospitals or prisons, where HMRC says the standard rate applies.

What stays at the standard rate?

Anything not on the list, and the materials on their own. HMRC is clear on the second point: However, if you supply energy-saving materials without installing them your supply will be standard-rated. So a merchant selling panels or insulation to the public charges the standard rate, whatever date it is.

• Double and secondary glazing, low emissivity glass and energy-efficient boilers are standard rated, apart from some grant-funded installs for people on certain benefits or aged 60 or over. The April change does not touch them.
• Wood-burning stoves and multi-fuel boilers are standard rated. Boilers that burn only wood, straw or similar are on the list.
• Insulation fitted as part of a bigger job takes that job’s rate. HMRC’s example is an extension: insulating its walls and roof as you build it is one standard rated supply.

What about jobs that cross 1 April 2027?

VAT Notice 708/6 does not cover jobs that cross the date, so HMRC’s general rules for a change of rate apply. The rate depends on the job’s tax point, the date the work counts as done for VAT, not the date you agreed it.

• One payment at the end: the tax point is normally the day the work is finished, unless you send a VAT invoice or are paid before then, in which case the earlier of those dates is the tax point for the amount invoiced or paid. If you send the VAT invoice within 14 days of finishing, the invoice date normally becomes the tax point. But when the rate goes up, HMRC lets you keep the old rate for work done before the change. Finish after 31 March 2027 and the job is normally at 5%.
• Stage payments: each stage is taxed when you are paid for it or invoice it, whichever comes first.
• An early 0% invoice does not hold the rate. HMRC’s guide says an invoice issued for a zero-rated or exempt supply does not create a tax point.
• A job that runs over the date can be split if the work can be measured and priced in your normal way: You may charge tax at the old rate on the part of the work which was performed before the date of the change and at the new rate on the part which was, or is to be, performed on or after that date.

Do subcontracted installs come under the reverse charge?

Not while they are zero rated, because the construction reverse charge only covers standard and reduced rated work. From 1 April 2027 the same install is reduced rated, so on our reading of HMRC’s rules, a VAT registered subcontractor fitting it for a VAT registered contractor under CIS would use the reverse charge from that date, if the other conditions are met. HMRC has not said this about April 2027 itself, but where the work is for a householder its guide already says supplies made to the contractor by subcontractors will still be subject to the reverse charge if the other conditions are met.

The homeowner is never part of it. From 1 April 2027, work you do direct for a homeowner is charged at 5% on your invoice in the normal way. The conditions, and a checker for a single invoice, are on our reverse charge guide.

Other questions about VAT on energy-saving installs