0% VAT on solar panels ends March 2027

The biggest automatic saving on solar, batteries and heat pumps has a deadline. Here's what it's worth, what happens after, and whether you should move now or wait for the government's new loan scheme.

What exactly is covered?

The 0% VAT rate applies to the supply and installation of energy-saving materials in residential properties. That includes solar PV panels, battery storage systems, inverters, mounting hardware, heat pumps (air-source and ground-source), insulation materials, and the associated installation labour. Essentially, if it's part of a renewable energy or energy efficiency installation in your home, it's covered.

The key word is residential. Commercial properties still pay the standard 20% VAT. And crucially, the installation must be carried out by an MCS-certified installer who supplies and installs the equipment — you can't buy panels separately online and claim the VAT relief on just the installation labour.

How much does it actually save?

The savings depend on what you're installing. Here's what the 0% rate is currently saving homeowners compared to the 5% reduced rate that returns in April 2027:

• 4 kW solar panel system (£7,000): saves £350
• Solar + battery system (£10,500): saves £525
• Air-source heat pump (£12,000 before BUS grant): saves £600
• Loft and cavity wall insulation (£3,000): saves £150

These aren't trivial amounts, but they're not enormous either. The real question is whether waiting costs you more or less than the VAT difference — and that depends on what else is changing in April 2027.

What changes in April 2027

Two things happen almost simultaneously, and they pull in opposite directions:

1 April 2027: VAT reverts to 5%. Your installation gets more expensive by roughly 5% overnight. No application required, no phase-out — installers simply start charging 5% VAT on invoices from that date. If your installation is completed before 31 March 2027, you get the 0% rate regardless of when you ordered.

April 2027: Government consumer loan scheme launches. The government has committed £1.7 billion to fund zero and low-interest loans for solar panels, batteries, and heat pumps. The loans will be available to all homeowners regardless of income, with interest-free options for lower-income households. However, the specific interest rates, loan caps, and participating lenders haven't been published yet — they're expected later in 2026.

This creates a genuine dilemma. Buy before March 2027 and you save on VAT but pay upfront. Wait until April 2027 and you pay 5% more but can potentially spread the cost with a government-backed loan at a favourable rate.

Should you act now or wait?

There's no universal answer, but here's how to think about it:

Act now if: you have the cash or can access a competitive personal loan (many are available at 5–7% APR), your roof is suitable, and you want to start saving on bills immediately. Every month of delay is a month of electricity bills you could have been offsetting. On a well-suited 4 kW system, that's roughly £50–£70 per month in bill savings you're forgoing.

Wait if: you can't afford the upfront cost and need the government loan to make it work. Paying 5% VAT but financing at 0% interest may work out cheaper than paying 0% VAT but financing at commercial rates of 10–13% APR. The maths depends on the loan terms — which we don't yet know.

The uncomfortable truth: the government has created a timing gap where early adopters get the VAT benefit and late adopters get the loan benefit, but nobody gets both. If you're in a position to buy now, the VAT saving plus 10 months of additional bill savings (from installing sooner) will almost certainly outweigh the 5% VAT increase — even if you have to use a commercial loan.

What about the Boiler Upgrade Scheme?

The BUS grant (£7,500 for heat pumps) is completely separate from the VAT relief and runs until at least March 2028. You can stack both: install a heat pump now, pay 0% VAT, and receive the £7,500 grant. After March 2027, you'd still get the £7,500 grant but pay 5% VAT on the remaining cost.

For a heat pump costing £12,000: installing before March 2027 costs you £4,500 out of pocket (£12,000 minus £7,500 grant, at 0% VAT). After March 2027, the same installation costs £4,725 (£12,000 minus £7,500, plus 5% VAT on £4,500). The difference is £225 — meaningful, but not dramatic.

What you should do right now

If you're seriously considering solar, a heat pump, or a battery, use our solar ROI calculator or heat pump calculator to model your specific numbers. The payback period and savings are highly dependent on your roof, your usage, and your region — the VAT saving is just one variable among many.

If the numbers look good, get quotes sooner rather than later. Not because of manufactured urgency — but because installer lead times are typically 6–10 weeks, and as the March 2027 deadline approaches, demand will spike and lead times will lengthen. The quiet window is now.

If the numbers don't work for your property, no amount of VAT savings changes that. A north-facing roof in Scotland with heavy shading doesn't become viable because of a 5% discount.