Spring Statement: government to cut VAT on retrofit materials for homeowners
Homeowners installing energy efficiency measures in their home will no longer have to pay VAT on the materials they use, the chancellor has announced.
Delivering his Spring Statement in the House of Commons today, the chancellor Rishi Sunak announced that for the next five years, homeowners will no longer have to pay 5% VAT on materials such as “solar panels, heat pumps or insulation”.
Mr Sunak announced the new tax rules as part of a series of measures to mitigate the impact of rising energy costs on UK households.
READ MORE
He said: “As energy costs rise, we know that energy efficiency will make a big difference to bills, but if homeowners want to install energy-saving materials at the moment, only some items qualify for 5% VAT relief and there are complex rules about who is eligible.”
The chancellor said the Court of Justice of the European Union previously prevented the government from extending the relief.
In documents accompanying the chancellor’s speech, the government said: “Taking advantage of Brexit freedoms, the government will include additional technologies and remove the complex eligibility conditions, reversing a Court of Justice of the European Union ruling that unnecessarily restricted the application of the relief. The government will also increase the relief further by introducing a time-limited zero rate for the installation of [energy saving materials].”
The document said a typical family having rooftop solar panels installed will save more than £1,000 in total on installation.
The changes being introduced mean that from April, homeowners will pay 0% VAT on retrofit materials for the next five years.
Inside Housing has asked the government to confirm whether social landlords will also benefit from the cut to VAT.
The policy is expected to cost the Treasury £280m up to 2026-27.
The Northern Ireland Protocol will prevent the Treasury from applying the tax cut in Northern Ireland, however the chancellor said Northern Ireland will receive funding equivalent to the value of the relief until the tax cut can be applied.
