At Spring Statement 2022 the government announced an expansion of VAT relief for energy saving materials (ESMs) in Great Britain, providing tax incentives worth approximately £280 million to improve the energy efficiency of homes over the five years to 31 March 20271. The changes reversed restrictions introduced in 2019 following a Court of Justice of the European Union ruling, reinstating wind and water turbines as qualifying materials and removing complex eligibility conditions that had prevented businesses and households from accessing the relief1. Qualifying installations, such as insulation, heat pumps and solar panels, benefit from a temporary VAT zero rate in GB until 31 March 20271.
The Treasury's Spring Statement said the government "will expand the scope of VAT relief available for energy saving materials and ensure that households having energy saving materials installed pay 0% VAT"2. The Chartered Institute of Plumbing and Heating Engineering reported the 0% rate as applying to homeowners in England, Scotland and Wales, and said it would stay in place for the next five years3.
The relief has a longer history. It applied to supplies made on and after 1 July 1998, and from 1 August 2013 the reduced rate was withdrawn for installations in accommodation or buildings used for relevant charitable purposes1. In 2019 the UK removed the reduced rate for the installation of wind or water turbines1. The government's later call for evidence states that the Spring Statement 2022 changes reversed those restrictions1.
Northern Ireland is treated separately. The Windsor Framework would enable the UK government to apply the Spring Statement 2022 changes, and any further changes, in Northern Ireland, and the government said it would return to this once the Framework had been ratified1. The Spring Statement 2022 itself described the VAT expansion without setting out a Northern Ireland commencement date2.
| Element | Detail |
|---|---|
| Relief value | Approximately £280 million over five years to 31 March 20271 |
| Zero rate applies until | 31 March 20271 |
| Reinstated materials | Wind and water turbines1 |
| Conditions removed | Complex eligibility conditions1 |
| Territorial scope | Great Britain; Northern Ireland subject to the Windsor Framework1 |
Why it matters for households
VAT is charged on the supply and installation of many home energy measures, so removing it changes the up-front cost of a qualifying installation rather than the running cost afterwards. For a household weighing up insulation, a heat pump or solar panels, the zero rate applies to the installed supply, which is where the labour and materials sit together. The VAT relief on energy-saving materials is time limited: the temporary zero rate runs to 31 March 2027, after which the treatment is subject to further decisions1. The end date of the 0% relief therefore matters to anyone planning work across that boundary, and the VAT treatment of heat pump installations is part of the same relief.
The reinstatement of wind and water turbines widens the list of technologies that can be installed at the zero rate, and the removal of eligibility conditions addresses the administrative tests that previously stood between some households and the relief1. The relief sits alongside other support for home energy work, including ECO4 and the Great British Insulation Scheme, though the sources here do not set out how the schemes interact.
What happens next
The government's call for evidence, published after the 2023 Spring Budget, sought views on adding further technologies, including battery storage, and on reinstating relief for charitable buildings1. The government said it would evaluate reform proposals against three objectives: improving energy efficiency and reducing carbon emissions, cost effectiveness, and alignment with broader VAT principles1. It also said it retains discretion to make tax policy decisions as part of the Budget process, taking account of the wider fiscal context1. No commencement date for Northern Ireland changes is given beyond the ratification of the Windsor Framework1.
Sources3 cited
- Call for evidence: VAT energy saving materials relief – improving energy efficiency and reducing carbon emissions - GOV.UK, gov.uk
- Spring Statement 2022, assets.publishing.service.gov.uk
- Tax cuts for green technology | CIPHE, ciphe.org.uk