Chancellor John Healey did not extend the 0% VAT rate for heat pumps, solar panels and solar batteries at the Budget, according to The Eco Experts. The rate is due to end on 31 March, and the report states that the cost of these installations will increase by 5% on 1 April 20271.
The report gives the following figures for heat pump installation after that date, with 5% VAT applied1:
| Property size | Two-bedroom | Three-bedroom | Four-bedroom | Five-bedroom |
|---|---|---|---|---|
| Air source heat pump cost after 1 April 2027 with 5% VAT | £8,400 | £12,600 | £14,700 | £17,850 |
| Ground source heat pump size | 4kW | 8kW | 11kW | 13kW |
| Ground source heat pump cost after 1 April 2027 with 5% VAT | £12,075 | £15,750 | £19,425 | £22,050 |
For solar, the report lists installation costs after 1 April 2027 with 5% VAT of £3,675 for a six-panel system on a one to two-bedroom home using 1,800 kWh a year, £6,132 for ten panels on a three-bedroom home using 2,700 kWh, and £8,578 for 14 panels on a four-bedroom home using 4,100 kWh1. For storage batteries, it gives a range of £3,150 to £4,200 for 4kWh, £4,200 to £5,250 for 5kWh, £8,925 to £10,500 for 10kWh, £11,340 to £12,600 for 12kWh and £12,600 to £16,800 for 16kWh1.
The report's own summary of the change is direct:
"The cost of heat pumps, solar panels, and solar batteries will increase by 5% on 1st April 2027"
The same article states that "The Chancellor John Healey didn't extend the 0% VAT for them at the Budget"1. No further detail of the Budget announcement itself, and no statement from HM Treasury or HM Revenue and Customs on the rate, has been reported in the material available.
Why it matters for households
A household weighing up solar panels, a battery or a heat pump is comparing systems whose installed price will include 5% VAT from April 2027, which affects the payback period on equipment bought to cut bills and to generate or store electricity at home. The VAT relief on heat pump installations and the wider VAT relief on energy-saving materials are the rules that set out which measures qualify and for how long, and the end date for the 0% VAT relief is the deadline that now stands unextended. Households in Northern Ireland have separate VAT arrangements for these installations. For anyone considering borrowing to fund work, the finance options for boilers, solar, batteries and heat pumps set out how the cost is typically spread. The change does not alter the running costs of a system once installed, only the tax on the installation itself.
What happens next
From 1 April 2027, the report states, heat pumps, solar panels and solar batteries will be subject to 5% VAT1. No further Budget measures on this rate have been reported.
Sources1 sources
- Get heat pumps and solar panels before the VAT hike - The Eco Experts, theecoexperts.co.uk