Government removes VAT for Heat Pumps and Battery Storage

13 December 2023

David Cowdrey and Richard Hauxwell-Baldwin, from the MCS Foundation, holding a 'ZERO CARBON = ZERO VAT' sign.

In March 2022, the Government announced proposed changes the rules around VAT for energy saving materials in Great Britain. They shared plans to provide tax incentives worth £280 million to improve the energy efficiency of British homes over a five-year period.

A year later, following the 2023 Spring Budget, a Call for Evidence was published seeking views on how the VAT relief on energy saving materials could be made more effective and easier to access. The Government called for evidence on Battery Storage systems being covered by VAT relief and whether there was any other technologies  or installation costs which should be covered.

The MCS Foundation was one of 106 businesses and organisations that responded to the Call for Evidence and campaigned for an expansion of the VAT relief. The MCS Foundation also constructively engaged extensively with the Treasury and HMRC to strongly support the extension of VAT relief.

Yesterday, the Government published a Summary of Responses to the Call for Evidence, which can be read on the Government website in full.

In response to the findings from the Call for Evidence, the Government will now be expanding VAT relief to bring the following renewable technologies and related works in scope:

  • Battery Storage systems retrofitted on to existing Solar PV installations
  • Water-Source Heat Pumps
  • Groundworks related to the installation of Ground-Source Heat Pumps

VAT will be removed from all of the above on 1st February 2024.  This policy applies across Great Britain until 31st March 2027, when the VAT amount will revert to 5% – subject to further decisions by the Government at the time.

The removal of VAT from these technologies and the associated work will significantly reduce the cost of installation and hopefully have a positive impact on uptake of renewable energy and heating technology in the UK as more consumers are able to afford and access low-carbon systems.

To learn more about the uptake of small-scale renewables in the UK during 2023, read our latest figures here.