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As part of the government’s Spring Statement 2022, Chancellor Rishi Sunak has announced that homeowner’s can now benefit from 0% VAT on energy efficient systems such as solar panels, heat pumps and insulation. This announcement comes after the energy price cap is set to rise to 54% and with the hope to help improve household energy efficiency whilst keeping energy costs down.
Solar panels are a great way to help lower household energy prices, all whilst generating carbon-free electricity. And now with the new tax relief, solar panels have never been viable for homeowners. According to Chancellor Rishi Sunak, “A family having a solar panel installed will see tax savings worth over £1,000 and savings on their energy bill of over £300 per year.”
VAT and Solar Panels
Whilst VAT is typically charged at the standard rate of 20%, up until now, homeowners would pay a reduced rate of 5% to a list of “energy-saving materials”. In order to encourage homeowners to invest in green technologies such as Solar PV. Previously, to benefit from the reduced 5% VAT rate, the cost of the equipment must not exceed more than 60% of the total installation. This threshold was mainly put into place for installations that included both solar panels and battery storage.
Whist Solar panels are on the list for “energy-saving materials”, battery storage systems still haven’t made the cut. With VAT on solar batteries still remaining at 20%. Whilst batteries are not a low-carbon technology, they have the ability to connect to low-carbon technologies and help support the shift towards energy independency. What’s more, they help increase the amount of renewable energy you can actually use within your home and your solar savings. This is why here at Deege Solar we always advise installing a battery storage system alongside your solar panel installation, in order to get the best value for money. However, we are aware that not everyone can afford the extra investment.
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