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Do You Have To Pay VAT On Solar Panels?

There is 0% VAT on solar panels in Great Britain

VAT is 20% for solar batteries if they are installed as a standalone product

In Northern Ireland, VAT on solar panels is still 5% to 20%

Despite development in the industry, the cost of solar panels is still pretty high, so it’s important to be aware of any measures that can make them cheaper, such as the Value-Added Tax (VAT) cut, which was introduced in April 2022.

In this article, we’ll take you through how the VAT cut applies to solar panel systems, and explain exactly which products and services qualify for different VAT rates.

If you already have all the information you need about VAT for solar panels, and want to find out how much one will cost you, you can fill out our short form. Just provide a few details about your property, and we’ll put you in touch with qualified solar panel installers, who will supply free quotes.

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A row of three brown houses with solar panels

Is there VAT on solar panels?

VAT is no longer imposed on solar panels in Scotland, England, and Wales that are installed on residential properties. This means there is no VAT on both the cost of solar panels and the cost of installation – though there are a few exceptions.

For example, you won’t pay VAT on solar panels or the installation if you use the same provider to supply and install them.

However, if you buy your solar panels from one provider, and choose a different provider to install them, you will pay 5% VAT on the cost of installation. You’ll also pay 5% VAT on the cost of any repairs or maintenance services that happen after your initial solar panel installation.

Before April 2022, the standard rate of VAT in the UK was 20%, or 5% under certain criteria, such as if you were over 60, or on certain benefits. It’s worth noting that in Northern Ireland, unlike the rest of the UK, the VAT rate remains the same as it was before.

This means if you live in Northern Ireland, you’ll pay 20% VAT on solar panel materials and installation. Is this news making you doubt whether solar panels in Northern Ireland are a good idea? Check out our page Should You Get Solar Panels in Northern Ireland? to find out.

You could be eligible to pay a reduced VAT rate of 5% if you meet certain eligibility requirements, such as being over the age of 60, receiving certain benefits, or meeting what the government calls ‘the 60% test’.

What’s the 60% test? To qualify for it, the cost of the solar panel materials needs to be more than 60% of the cost of installation. You’ll then only pay 5% VAT on the cost of installation, but still pay 20% VAT on the cost of solar panel materials.

VAT has also been cut for some low-carbon heating technology, such as air source heat pumps.

Has this actually made the cost of solar panels cheaper?

In Great Britain, the 0% VAT rate has made solar panels slightly cheaper, but not by much.

For example, under the old 5%–20% VAT rate, a 3.5 kilowatt peak (kWp) solar PV system (suitable for a three-bedroom house) would cost around £7,860. Under the current rate of VAT, that same system would cost around £7,467.

There are also some government grants for solar panels available, which can relieve some of the costs.

However, because of rising inflation, many installers have had to raise their prices. So the average buyer will still be paying a similar amount for their solar panels to what they would have paid before the 2022 VAT cut.

Why did the UK government cut VAT on solar panels?

The UK government cut VAT on a number of energy-saving products, including solar panels, to encourage more homeowners to install them by making them cheaper.

The government is also aiming to improve the energy efficiency of UK homes to help with the cost of living crisis – and solar panels can help achieve this. For example, they can reduce the average home’s electricity bills by around 54% a year.

Encouraging more homes to invest in renewable energy, such as solar, will also support the UK government’s pledge to reach net zero by 2050. More homes using renewable energy, means fewer carbon emissions.

Want to find out more about how renewable tech can cut your energy bills? Read our page on how an eco-home can save you money.

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How long will the 0% VAT rate last?

The 0% VAT rate on solar panels will last until April 2027. After that, VAT on solar panels will increase to 5% – meaning it won’t go back to the 20% rate.

You won’t need to meet the pre-April 2022 criteria to qualify for the reduced rate either. The 5% VAT rate will apply to solar panels being installed on any residential property.

This means that even when the 0% rate ends in 2027, VAT on solar panels will still be less than it was before April 2022.

Rows of solar panels in a field

Do you have to pay VAT on solar batteries?

You still have to pay 20% VAT on solar batteries in the UK if they are installed as a stand-alone product. This is because solar batteries are not currently included in the government’s list of energy-saving products that qualify for 0% VAT.

However, if you live in Great Britain and have solar batteries installed as part of a solar panel system, you won’t have to pay any VAT on them.

It’s unclear why solar batteries are not included in the government’s list of energy-saving products that qualify for 0% VAT.

Like solar panels, solar storage batteries can reduce both energy bills and carbon emissions by storing excess electricity produced from  the panels, to be used later.

How does the UK’s solar VAT rate compare with the rest of Europe?

The European Union (EU) also updated its VAT regulations in April 2022, and now allows its member states to cut VAT on solar panels, and reduce VAT to as low as 5% on other energy-saving products, such as heat pumps. Since then, a few EU countries have taken advantage of the new regulations.

For example, in Germany, there has been no VAT on solar panels or solar batteries – including both materials and installation – since January 2023. And in Belgium, VAT on solar panel systems has been reduced to 6%, from April 2022 to December 2023.

In most European countries, you still have to pay some VAT on solar panels – unlike in Great Britain. But with the EU also aiming to reach net zero emissions by 2050, more EU members could follow suit, and reduce or cut VAT on solar panels in the future.

Next steps

According to the Microgeneration Certification Scheme (MCS), around 1.1 million homes in the UK have solar panel systems installed, with the number is rapidly increasing –, and it’s not hard to see why. After all, using solar energy will lead to cheaper electricity bills for you, and fewer carbon emissions for the planet.

And with the 0% VAT rate on solar panels in place for the next few years, there’s never been a better time to invest in solar panels.

If you’re ready to start using solar energy and want to find out how much a set of panels will cost you, then fill out our quote form. We’ll pass your details on to professional solar panel installers, who’ll provide you with their best prices.

Frequently asked questions

VAT is 5% for both gas and electricity used in residential homes in the UK. So far, the UK government has not announced any plans to reduce VAT on energy bills.

For businesses, VAT is 20% on gas and electricity. Your business might qualify for 5% VAT if it meets certain criteria such as if it’s a charity, has a low usage, or if you work from home.

If you sell the excess electricity generated by your solar panels back to the National Grid, you won’t be taxed on any income you make.

You can find out more about this by visiting our page on the Smart Export Guarantee (SEG) scheme.

If you live in Northern Ireland, you’ll pay the standard 20% VAT rate – unless you meet the criteria to pay a reduced rate of 5%.

To qualify for 5% VAT on solar panels, you need to be receiving certain benefits. If you don’t meet this criteria, you can still qualify for 5% VAT on  solar panels if the upfront cost  is more than 60% of the cost of installation.

VAT is 5% on home improvements in the UK. But you’ll pay 0% VAT in Great Britain if you are installing certain energy-saving products, such as heat pumps, insulation, and solar panels.
Written by:
Tatiana has written about multiple environmental topics, including heat pumps, energy-efficient household products, and solar panels. She is dedicated to demystifying green tech to make eco-friendly living more accessible.
Reviewed by:
Charlie has been researching and writing about the home energy market for over five years, and he has been the editor of The Eco Experts since 2021. Charlie's thoughts on solar panels have seen him featured in various publications, including The Times, Ideal Home, and Grand Designs Magazine. Ever since he can remember, Charlie has worried about the planet, and he one day dreams of owning a solar power farm.
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