VAT Cut On Solar Batteries Comes Into Effect In The UK

From February 2024, 0% VAT will be applied to all solar storage batteries in the UK, whether they’re installed as a standalone product, or as part of a solar panel system.

The government introduced a VAT cut on solar panels in Britain in April 2022, bringing VAT down to zero from the previous 5% to 20% rate. The VAT cut was extended to Northern Ireland in May 2023.

Prior to February 2024, 0% VAT only applied to storage batteries installed as part of a solar panel system, and not batteries installed retroactively, or as a standalone product.

0% VAT will now apply to all storage batteries, whether they’re installed alongside a microgeneration system, such as solar panels or domestic wind turbines, retrofitted to one, or simply installed as a standalone product for storing electricity from the grid.

The VAT cut also applies to a host of other energy saving materials, including air and ground source heat pumps, and, as of February, water source heat pumps.

There’s no extra work for you to do either, since 0% VAT will automatically be applied to your installation by your installer.

Chris Hewett, Chief Executive of Solar Energy UK, had this to say on the new VAT rules:

“The cut in VAT is exceedingly welcome, and we have every expectation that it will increase demand for home battery energy storage. Allowing solar power to be used after dark, can double the savings offered by home solar power systems. There has never been a better time to upgrade than today”.

Solar Energy UK, a non-profit representing businesses in the solar industry, had criticised the government for not including standalone or retrofitted solar batteries in the initial VAT cut. They launched a campaign, alongside parliamentarians, to rectify what they called an “anomaly” in the 0% VAT rules.

The VAT cut for solar panels and solar batteries will be in place until 1 April 2027.

How much does a solar storage battery cost at 0% VAT?

An 8 kilowatt (kW) solar storage battery costs £4,500 on average to buy and install. This is the size battery a typical three-bedroom house would need to store excess electricity from their solar panels.

With the new VAT cut, you’ll now pay 5% to 20% less, saving you £225 to £900 on average.

A storage battery lets you store the excess electricity your solar panels produce during the day so that you can use it when the sun goes down and your panels stop producing electricity. Adding a solar battery can increase your electricity bill savings by around £227 a year, compared to not having one.

However, given that the cost of solar panels alone is already quite high, it’s understandable if you don’t fancy forking out an extra £4,000 or so on a battery.

If that’s the case, you can earn money from the electricity you don’t use by selling it back to the grid with the Smart Export Guarantee (SEG), which can add roughly £159 to your yearly savings.