Air source heat pumps installed in England, Scotland and Wales have been zero rated for VAT since 1 April 2022, under a temporary rate that runs to 31 March 2027. The same commencement date removed the eligibility conditions that had applied to the relief, and HMRC records that removal as permanent1.
Before that date, air source heat pumps had been reduced rated since 7 April 2005, and from 1 October 2019 reduced rated subject to eligibility conditions described as social policy conditions and a 60% test1. The zero rate replaced both the reduced rate and those conditions for qualifying installations in Great Britain1.
The relief was extended to Northern Ireland later. From 1 May 2023 to 31 March 2027 air source heat pumps are zero rated UK wide, with eligibility conditions removed permanently in Northern Ireland1. HMRC defines GB as England, Scotland and Wales, and UK as also including Northern Ireland1.
The zero rate is temporary. HMRC states that the term "zero rated" refers to the temporary zero rate applying until 31 March 2027, after which the reduced rate applies1. For air source heat pumps the table lists the position from 1 April 2027 as reduced rated1.
The same dates apply to several other energy-saving materials, including ground source heat pumps, controls for central heating and hot water systems, draught stripping, insulation, micro combined heat and power units, solar panels and wood-fuelled boilers, all zero rated in GB from 1 April 2022 and UK wide from 1 May 2023, with the reduced rate returning from 1 April 20271. Electrical storage batteries, smart diverters and water source heat pumps have a shorter window, zero rated UK wide from 1 February 2024 to 31 March 20271.
Relief for charitable buildings followed a separate path. Installations qualified for relief in both residential accommodation and charitable buildings until 31 July 2013, when the relief was withdrawn from charitable buildings and only residential accommodation qualified. From 1 February 2024 the relief for charitable buildings was reinstated, and installations now qualify in both residential accommodation and charitable buildings1.
"The term “zero rated” refers to the temporary zero rate applying until 31 March 2027 (after which the reduced rate applies)."
| Period | Air source heat pumps |
|---|---|
| From 7 April 2005 | Reduced rated |
| From 1 October 2019 | Reduced rated subject to eligibility conditions (social policy conditions and 60% test) |
| 1 April 2022 to 31 March 2027 | Zero rated GB (England, Scotland and Wales only), eligibility conditions removed permanently GB |
| 1 May 2023 to 31 March 2027 | Zero rated UK wide, extended to Northern Ireland, eligibility conditions removed permanently NI |
| From 1 April 2027 | Reduced rated |
Why it matters for households
VAT is charged on the supply and installation of a heat pump, so the rate that applies changes the total a household pays. At zero rate no VAT is added to a qualifying installation; at the reduced rate the charge is lower than the standard rate but not nil. The removal of the eligibility conditions matters because it means a household no longer has to meet the social policy conditions or the 60% test to obtain the relief in Great Britain, and the removal is recorded as permanent1.
The temporary nature of the zero rate is the part with a fixed end. The reduced rate returns on 1 April 2027, so an installation completed before that date and one completed after it fall under different VAT treatment1. Households in Northern Ireland gained the zero rate later, from 1 May 2023, and the conditions there were also removed permanently1. The rules sit alongside the wider UK heat pump policy and targets framework and the separate Northern Ireland VAT position.
What happens next
The zero rate for air source heat pumps runs to 31 March 2027 in GB and UK wide. From 1 April 2027 the reduced rate applies1. No further commencement dates beyond that are given in the HMRC table.