REDUCED VAT RATE: The installation of certain energy-saving products qualify for a reduced VAT rate of 5%.
The supplier will charge the reduced rate on the installation as well as any extra work related to it.
Not all products qualify for the VAT reduction. The items which do qualify must get installed by an approved supplier.
Note: Home DIY does not qualify! You must use a qualifying supplier and installer to get reduced VAT on energy saving products.
Energy-Saving Products that Qualify
A list of qualifying energy products for the reduced VAT rate of 5% includes:
- Air-source heat pumps (ASHP).
- Biomass and wood-fuelled boilers
- Draught excluders & insulation (including windows, doors, and lofts).
- Electronic controls for central heating, air conditioning, and hot water systems.
- Geothermal ground-source heat pumps.
- Insulation in walls and on floors, ceilings, or lofts.
- Micro combined heat and power units (micro-CHP).
- Solar panelling.
- Wind and water turbines.
Note: HMRC VAT Notice 708/6 explains how contractors or subcontractors who install energy-saving materials and grant-funded heating equipment should account for VAT.
Central Heating Systems
Having work done through one of the energy efficiency grants means you only pay 5% tax on:
- Heating appliances installation.
- Central heating systems installation, repair, and maintenance.
- Renewable source heating installation, repair, and maintenance.
Energy Efficiency Grant Eligibility
To qualify for the grant you need to be over 60 years old or receiving one of these benefit entitlements:
- A disablement pension
- Child Tax Credit (excluding the family element)
- Council Tax Benefit
- Disability Living Allowance
- Housing Benefit
- Income Support
- Jobseeker’s Allowance (income-based JSA)
- Personal Independence Payment
- War Disablement Pension
- Working Tax Credit
Note: The work must be part of the grant-fund to qualify for the reduced VAT rate on energy saving materials.
Energy Saving Products that Do Not Qualify
The standard rate of VAT applies to:
- Boilers that are energy efficient.
- Double glazing and secondary glazing.
- Energy efficient fridges, freezers, and combinations thereof.
- Heating appliances or systems (unless an energy efficiency grant applies).
- Low emission glass.