VAT on Solar Panels in the UK – What do you pay?

Do You Pay VAT on Solar Panels in the UK?

If your considering solar panels you’ve probably wondered: is there VAT on solar panels? Well the good news is that right now across England and the majority of the UK you will currently pay 0% VAT. This becomes a meaningful additional saving on a purchase that already pays for itself over time!

However the current discounts aren’t permanent and there are varying rules across some parts of the UK. In this blog we’ll look into exactly how VAT on solar panels works. How you can benefit and why timing may be more significant than you may think.

Is There VAT on Solar Panels Right Now?

Since the 1st April 2022, the majority of homes in England, Scotland and Wales will pay no VAT on the supply and installation of solar panels. Prior to this the previous rate was at anywhere between 5%- 20% depending on your individual circumstances.

The UK Government dropped the VAT rate to 0% to encourage investment in greener homes that use Energy Saving Materials (ESMs). Solar PV appears on the Government’s approved ESM list, and when homeowners install battery storage at the same time, both qualify for the zero VAT rate

So when asking: “Is there VAT on solar panels?”. The answer in the main will be- no- for the majority of UK home owners. However Northern Ireland follow a slightly different set of qualifying conditions which we’ll cover below.

Who Qualifies for 0% VAT on Solar Panels in the UK?

To encourage the uptake of energy saving measures the UK Government set really broad qualifying criteria for England, Scotland and Wales. Which is great news for home owners! To qualify for 0% VAT on solar panels your installations needs to meet the following simple criteria:

You don’t need to be in receipt of a qualifying benefit or be over 60 years old. As required under the older rules. However it is important to note that if you purchase your solar panels separately then the rules change.

This is because the zero rate is designed around installed systems, not products bought off the shelf. Which is antoher key reason why working with a professional qualified installer matters both for compliance and for peace of mind.

What if I live in Northern Ireland?

If you live in Northern Ireland then unfortunately the 0% rate does not apply. The previous rules are still in operation. Which means solar is charged at 20% VAT unless a reduced rate of 5% can be qualified. The 5% rate depends on meeting a set of criteria or passing what is referred to as the “60% test”.

The test dictates that if the cost of the materials is more than 60% of the whole installed job then the reduced rate applies to the labour element. Not the panels/batteries themselves. As the previous rules are more complex to apply if you live in NI its worth getting tailored advice prior to committing.

Can I Get 0% VAT on Battery Storage?

As we’ve mentioned above- if your battery storage is installed as part of your solar PV installation then Yes. You can get 0% VAT on battery storage.

As battery storage are not on the Governments ESM list in their own right- they must be installed as part of your Solar PV system to qualify. Installing both solar panels and battery storage at the same time qualifies the package at zero rate VAT.

If you buy and install a battery as a standalone system it does not qualify for 0% VAT. Industry bodies are currently working with the government to add standalone batteries to the ESM list. But at the time of writing the 0% rule remains tied to solar.

So in summary – install both together and you save. If you add battery storage later you wont benefit from 0% VAT. So if your considering battery storage and can afford to install at the same time as your solar PV it could be a smarter financial move to do so.

When Does the 0% VAT Rate End?

As we’ve mentioned above the 0% rate isn’t permanent and is due to come to an end on the 31st March 2027.

From the 1st April the UK VAT on solar panels will revert to 5%. This still reduces the 20% standard rate, but it can add a considerable amount to your setup costs.

This means the timing of your decision to install your set up could be a genuine factor in terms of affordability.

Why Is the 0% VAT Rate Ending?

The Government introduced the time-limited 0% rate as part of the Spring Budget Statement in 2022. Designed to incentivise green energy adoption in line with the UK’s net zero targets. Running from the 1st April 2022 with an expiry date of 31st March 2027.

The Treasury generally sets an expiry date for relief measures to manage the budget and review the scheme’s success.

Industry and trade bodies continue to lobby for the extension of the 0% rate. In addition to its expansion to cover standalone battery storage. However there’s no guarantee, so the sensible planning assumption is that the deadline stands.

Do Businesses Benefit From 0% VAT on Solar Panels?

As the 0% VAT rate is a relief for homeowners it applies solely to residential properties. Businesses in general are not eligible for the incentive.

However any VAT registered business can reclaim the VAT paid on qualifying purchases via their normal VAT return procedures. In most cases, businesses can reclaim the VAT paid on a commercial solar installation.

Nuances do exist around mixed use buildings that are classed as part commercial and part residential. As these situations are often complex its best to seek professional advice prior to commitment.

So in summary; homeowners get the direct 0% benefit. Businesses usually work through VAT recovery instead.

How Does the UK’s Solar VAT Rate Compare With the Rest of Europe?

The VAT treatment for residential solar varies widely across Europe. By comparison, the UK offers a very generous 0% rate, although most countries still apply a reduced VAT rate.

In an attempt to encourage green energy, most European nations have introduced a reduced rate of between 5% to 10%.

However, some parts of Europe have already reverted VAT on solar for new buildings to standard rates of around 21%, significantly increasing costs. So currently the UK’s current 0% rate is a stand out relief. It is also a strong reason to install before March 2027 when the UK will look more like its European neighbours than the outlier it is today.

VAT on Solar Panels– the Bottom Line!

So, do you pay VAT on solar panels in the UK? For the majority of UK homeowners right now, the answer is a welcome no. The 0% rate covers solar PV and also battery storage if installed as part of a qualifying system. Which is currently one of the most favourable rates in Europe!

However the window of opportunity is closing on the 31st March 2027. After which the rate returns to 5%. Other key points to remember include:

• Northern Ireland follows separate rules
• Standalone batteries don’t qualify
• Businesses don’t qualify

If solar has been on your mind, the message is clear: acting sooner rather than later means keeping more money in your pocket!

E-Verve Can Help You Make the Most of 0% VAT on Solar Panels

Team E-Verve take the guesswork out of going solar. We handle the supply and installation as a single, compliant service, which is exactly what’s needed to secure the 0% VAT rate on your system. That means you see the saving reflected in your quote, with no surprises later.

Here’s how we support you:

If you’d like to know exactly what solar could save you, get in touch with Team E-Verve. We’ll walk you through your options so you can save money now, and cut your energy bills for years to come.

If you want a system built around your needs by a team that treats your home as carefully as we’d treat our own, reach out and we’ll give you a clear plan to move forward with confidence.

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