Installing a heat pump, solar panels or insulation in your home has been VAT-free since 2022, and batteries since 2024. That ends on 31 March 2027. From 1 April 2027 the rate goes back to 5%. The government confirmed the date at Budget 2026 on 28 October 2026. It is the end of a temporary relief, not a new tax.
If you are planning an upgrade, 5% matters. On a typical air source heat pump it adds about £645. For homes heated by oil or LPG, the £9,000 heat pump grant also ends on the same date.
Last checked against HMRC VAT Notice 708/6 and HMRC's Budget 2026 overview of tax legislation and rates on 28 October 2026.
At a glance
| Key fact | Detail |
|---|---|
| What changes | VAT on installing energy-saving materials in homes goes from 0% to 5% |
| When | 1 April 2027. The last day of 0% is 31 March 2027 |
| Confirmed | Budget 2026, 28 October 2026 (HMRC overview of tax legislation and rates, section 2.22) |
| Where | Homes across the UK, plus buildings used solely for charitable purposes |
| Main products | Heat pumps, solar panels, batteries, insulation, heating controls, draught stripping |
| Not covered | Windows, doors, double glazing, gas and oil boilers, materials you fit yourself |
| New from April 2027 | Heat batteries join the list at 5% |
Step 1 of 3
See what your home needs first
Enter your postcode to see this property's EPC rating, expiry date and recommended improvements, so you know which upgrades to price up before the VAT deadline.
Which upgrades are affected
The relief covers energy-saving materials supplied and installed by a business, or installed by a business using materials you bought. If you buy materials and fit them yourself, they are standard-rated at 20%.
| Upgrade | Until 31 March 2027 | From 1 April 2027 |
|---|---|---|
| Air, ground and water source heat pumps | 0% | 5% |
| Solar panels (PV and solar thermal) | 0% | 5% |
| Batteries, with solar or on their own | 0% | 5% |
| Insulation (loft, walls, floors, roofs) | 0% | 5% |
| Heating controls (timers, thermostats, radiator valves) | 0% | 5% |
| Draught stripping | 0% | 5% |
| Smart diverters, wind and water turbines, micro CHP | 0% | 5% |
| Wood-fuelled (biomass) boilers | 0% | 5% |
| Groundworks for ground and water source heat pumps | 0% | 5% |
| Heat batteries | 20% | 5% (planned) |
| Windows, doors and double glazing | 20% | 20% |
| Gas, oil and LPG boilers | 20% | 20% |
A few details from HMRC's guidance:
- Air conditioning. HMRC treats most fixed air conditioning units as air source heat pumps, so they count. Portable units do not.
- Biomass. Wood-fuelled boilers count, but multi-fuel boilers and standalone wood-burning stoves do not.
- Grant-funded heating. Some grant-funded heating installations for people aged 60 or over, or on certain benefits, already qualify for 5% under separate rules. A new boiler fitted that way is one example.
What 5% adds to the cost
VAT at 5% adds £5 for every £100 of the installation price. Using typical costs from the government's Boiler Upgrade Scheme statistics for April to June 2026:
| Installation | Typical (median) cost | 5% VAT |
|---|---|---|
| Air source heat pump | £12,908 | about £645 |
| Ground source heat pump | £27,232 | about £1,362 |
For solar panels, batteries or insulation, take 5% of your quote. An £8,000 solar and battery system would carry £400 of VAT.
Oil and LPG homes face a double deadline. The Boiler Upgrade Scheme pays £9,000 towards a heat pump for off-gas-grid homes on oil or LPG until 31 March 2027, compared with £7,500 for everyone else. After that, a typical air source heat pump could cost about £2,145 more: a £1,500 smaller grant plus about £645 of VAT. Ask your installer what has to happen by 31 March 2027 for the grant and for the VAT rate.
Heat batteries: the exception
Heat batteries store heat, often from cheap off-peak electricity, and release it for heating or hot water. They are not on HMRC's current list of energy-saving materials, so they normally carry 20% VAT. The government plans to add them to the relief at 5% from 1 April 2027, through legislation it will lay before then.
For a heat battery, waiting until April 2027 could cut the VAT from 20% to 5% of the price. Most other upgrades go the opposite way.
Who the relief applies to
- Homes of every kind: houses, flats and other dwellings, including park homes, residential houseboats and student accommodation.
- Landlords: the relief depends on the building, not who owns it, so rented homes and self-catering holiday lets qualify.
- Charity buildings: buildings used solely for relevant charitable purposes, such as village halls, have qualified since 1 February 2024.
- Not covered: hotels, inns and similar establishments, hospitals and prisons.
- New homes: energy-saving materials installed while a new home is being built are zero-rated as part of the construction, so the April 2027 change does not affect them.
How to plan before 31 March 2027
- Start with your EPC. Its recommendations show which upgrades are likely to make the most difference, and in what order. Insulation usually comes before a heat pump.
- Get quotes now. Heat pump demand is at a record. Ofgem issued more Boiler Upgrade Scheme vouchers in August 2026 than in any month since the scheme began, and good installers book up.
- Ask how VAT will be charged. If your job might finish close to 1 April 2027, ask your installer which rate will apply before you pay a deposit.
- Apply for the grant through your installer. Heat pump vouchers are issued first come, first served until each year's budget runs out. The budget for 2027-28 is £400 million, less than was planned.
- Sort out finance early. If you are borrowing, the Warm Homes Loan Scheme offers government-backed loans for heat pumps, solar and batteries. The extra VAT would increase how much you need to borrow.
For more on the costs, see our guides to air source heat pump costs, solar panels and your EPC and EPC improvement costs in 2026. For everything else in the Budget, see what Budget 2026 means for your home.
Sources
- HMRC: VAT on energy-saving materials and heating equipment (VAT Notice 708/6)
- HMRC: Budget 2026: Overview of tax legislation and rates, section 2.22 (28 October 2026)
- HM Treasury: Budget 2026 document (28 October 2026)
- DESNZ: Boiler Upgrade Scheme statistics: August 2026 (24 September 2026)
- GOV.UK: Apply for the Boiler Upgrade Scheme