VAT 5% rate on energy saving materials drop to 0%

Chancellor Rishi Sunak announced last month in his Spring Statement, that energy-saving materials are no longer subject to VAT. Under the new scheme, homeowners will pay zero VAT on solar panels, heat pumps, and additional insulation for five years. This is a great opportunity for those who are concerned about the rising cost of energy and anyone considering upgrading heir gas or oil heating system to a more energy efficient and environmentally friendly heat pump.

Currently, the value added tax (VAT) on energy-saving materials is 5% but this will change from 1st April 2022 and run until 2027. On 1 April 2027 the installation of qualifying energy-saving materials in Great Britain will revert to the reduced rate of 5%.

The Chancellor said: "A family having a solar panel installed will see tax savings worth over £1,000 and savings on their energy bill of over £300 per year."

In the UK, the biggest problem is that homes are not very energy efficient. We have some of the oldest buildings in Europe. These buildings are hard to heat and are notorious for mould and damp. According to the Climate Change Committee, only eight million homes meet the highest energy standards. By lowering VAT, we could see the number of home improvements increase significantly.

The new government has backed the campaign and is offering financial assistance to homeowners who install energy-saving measures. 

What are the benefits of adopting these measures?

There are several benefits to adopting these measures: 

  1. They reduce household electricity bills. 
  2. They reduce our carbon footprint. 
  3. They can be sold back to energy suppliers, which is beneficial in many ways. 

The change to 0% VAT also applies to heat pumps and home insulation. 

The details of which technologies qualify and when they will be introduced are not yet available, but Mr Sunak has said that he will talk to Northern Ireland urgently to discuss the changes.

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