The Treasury issued a call for evidence proposing to extend the existing zero VAT rating for solar panels, heat pumps and insulation to battery storage, both when retrofitted to a solar photovoltaic system and when fitted as a standalone unit1. The proposal follows what the Treasury describes as "multiple requests" from Solar Energy UK and from Parliament1. Solar Energy UK said Chancellor Jeremy Hunt acted in response to its sustained lobbying on the taxation of battery systems1.
Under the rules in force at the time, VAT relief on a battery was available only where the battery and the solar panels were fitted simultaneously1. Solar Energy UK said this discouraged upgrades and left existing solar homes more reliant on grid power1. Lord Foster of Bath made the same point in a September 2022 debate on the Energy Bill, saying there should not be a fiscal incentive to install a battery at one time but not at another1.
The Budget also introduced full expensing, allowing companies to write off the cost of investments in certain plant and machinery in one go, and the Treasury confirmed the three-year allowance applies to solar energy1. A £63m Swimming Pool Support Fund will partly fund energy efficiency upgrades to cut running costs that have risen to unsustainable levels during the energy price crisis1.
"While there are certainly valuable elements, not least on VAT for battery storage, and a short-term opportunity for solar thermal in swimming pools, yesterday's Budget was out of step with the mainstream trends in the global energy transition, where investment is pouring into solar, wind and energy storage."
Solar Energy UK also said the sector has no investment allowance under the Energy Generator Levy, unlike the oil and gas industry, and that slow grid upgrades are pushing the expected completion of some solar projects well into the 2030s1.
Why it matters for households
A battery lets a household store solar electricity generated during the day and use it in the evening, rather than exporting it and buying power back later. Under the rules described, a household that installed panels first and added a battery afterwards paid VAT on the battery, while one installing both at once did not1. The call for evidence concerns that difference. It does not change the rate on its own, and no outcome, timetable or final rate has been reported. The VAT rate on home battery storage and the wider VAT relief on energy-saving materials set out how the current rules work, including which energy-saving materials qualify and whether solar panels are needed to get VAT-free battery storage. Households in Northern Ireland face separate arrangements, covered in VAT relief in Northern Ireland. For those weighing a retrofit, adding battery storage to a solar system and finance for boilers, solar, batteries and heat pumps cover the practical ground, alongside grants and funding for home battery storage.
What happens next
No closing date, response date or decision on the call for evidence has been reported1.
Sources1 cited
- Spring Budget: Solar Energy UK’s lobbying pays off, solarenergyuk.org