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Government extends VAT relief on Energy Saving Materials

General Posted: 18 December, 2023. Written by Anthony Sammie

Government has announced the expansion of VAT relief on energy saving materials (ESMs) commencing 1 February 2024. The zero-rated VAT applies to: 

  • electrical battery storage
  • water-source heat pumps; and
  • diverters retrofitted to ESMs such as solar panels and wind turbines.

The expansion of VAT relief also extends to the installation of ESMs in buildings used only for relevant charitable purposes, while remaining in place for residential buildings. The Government is expected to publish a list of groundworks required for installation of ground source and water source heat pumps to benefit from VAT relief. 

This important policy update will enable more households to install energy saving technologies, improve efficiency and reduce energy bills. This initiative is also aimed at meeting the commitment to reach net zero greenhouse gas emissions by 2050. 

Commenting on this recent expansion of the VAT relief, Virginia Graham, Chief Executive of REAL, said: 

At RECC and EVCC, we welcome this extension of VAT to additional technologies. This gives consumers further opportunity to install energy saving materials, particularly water source heat pumps and electricity battery storage, which will provide consumers with greater incentive to adopt renewable energy technologies. We encourage consumers to take advantage of this relief and implore Government to continue exploring policy initiatives to encourage domestic and business consumers to invest in critical energy saving materials.” 

In the Spring Budget of 2023, Government launched a Call for Evidence seeking views from relevant stakeholders on further reforming this VAT relief, particularly extending relief to additional technologies. The temporary zero VAT rate has a 5-year span from its introduction in 2023 and is due to expire on 31 March 2027.

More information on this policy initiative can be found here