Since April 2022, solar panels, battery storage, heat pumps, and certain other energy-saving measures have been zero-rated for VAT in the UK. This means a typical 4kWp solar installation saves the homeowner around £1,200 in VAT that would otherwise be payable. Here's everything you need to know about how the relief works, what qualifies, and how to make sure your installer applies it correctly.
What the 0% VAT Rate Means
Under the Energy Saving Materials (ESM) relief, qualifying products and their installation are charged at 0% VAT rather than the standard 20% rate. This is not a rebate — the VAT is simply never charged. On a £20,000 solar and battery system, 0% VAT saves exactly £4,000 compared to the standard rate. The relief was introduced at 5% reduced rate for many years before being increased to 0% by the Spring Statement 2022, and it has been extended through to at least March 2027 under current Treasury commitments.
Which Products Qualify?
- Solar PV panels: All residential solar panel installations qualify, regardless of system size.
- Battery storage systems: Qualify when installed alongside solar, or as a standalone retrofit to an existing solar installation. The battery must be predominantly charged from solar to qualify — a pure grid-charging battery may not meet the ESM criteria.
- Air source heat pumps and ground source heat pumps: Fully qualify under ESM relief.
- EV chargers installed as part of a solar package: When an EV charger is installed in the same supply as a solar or battery system and is integrated as part of the energy management system, HMRC guidance indicates it may qualify. However, this is a grey area and installers should seek specific confirmation.
- Insulation (loft, cavity wall, solid wall): Qualifies under ESM relief when installed in a residential property.
Which Products Do NOT Qualify?
- Standalone EV chargers: An EV charger installed without any solar or energy storage system does not qualify for ESM relief and is subject to standard 20% VAT.
- Pure electrical work: Rewiring, consumer unit upgrades, and other general electrical work not directly part of an energy-saving installation are subject to 20% VAT.
- Scaffolding as a standalone charge: Where scaffolding is invoiced separately and not as part of the installation package, VAT treatment can differ — though most reputable installers include it within the qualifying supply.
The History of the Relief
Before April 2022, ESM products were subject to a 5% reduced rate of VAT. The Chancellor's Spring Statement 2022 reduced this to 0% for a temporary five-year period to encourage uptake of energy-saving measures following the energy price crisis. The relief was subsequently confirmed as extended to at least March 2027, with strong indications it will be made permanent given the government's net-zero commitments.
How to Verify Your Installer Applies It Correctly
A legitimate MCS-certified solar installer will automatically apply 0% VAT to qualifying supplies. Your invoice should clearly show each line item at 0% VAT with a note referencing the Energy Saving Materials relief. Red flags include:
- An invoice showing 20% VAT on solar panels or battery storage — this is incorrect and you should query it immediately.
- An installer who is not VAT-registered — while this can be legitimate for very small businesses, most reputable solar installers are VAT registered and should be applying 0%.
- A mixed invoice showing some items at 0% and others at 20% where the split is unexplained — ask for clarification on each line.
A common mistake we see is installers incorrectly charging 20% VAT on battery storage retrofits, arguing the battery is not installed "alongside" solar. HMRC's guidance is clear that a battery added to an existing solar installation qualifies for 0% VAT — you should challenge any installer who tells you otherwise.
Commercial Solar VAT
The 0% ESM VAT relief applies to residential installations. For commercial solar, the rules are different but equally favourable: most commercial solar installations are also zero-rated or reduced-rated under ESM rules when installed on non-residential buildings. Additionally, VAT-registered businesses can typically recover any input VAT they do pay on solar installations through their VAT returns, making the net VAT cost zero regardless. Combined with Full Expensing capital allowances (100% first-year deduction), commercial solar is one of the most tax-efficient capital investments available to UK businesses.
Read our full 0% VAT solar guide or view our residential solar service.
