Is there VAT on solar panels? Two answers and one date

If the panels go on a home, there is no VAT on the installation: energy-saving materials installed in residential accommodation have been zero-rated in Great Britain since 1 April 2022 and in Northern Ireland since 1 May 2023, and the zero rate is scheduled to run until 31 March 2027, after which it reverts to the 5% reduced rate. Buildings used solely for a relevant charitable purpose joined the relief on 1 February 2024, as did batteries. If the panels go on business premises the installation is standard-rated at 20%, and a VAT-registered business recovers it as input tax on the next return. Both answers, with their sources, are on our VAT on solar panels page.

Why the home answer has a date on it

The zero rate is written into Group 23 of Schedule 8 to the VAT Act 1994 with an end date of 31 March 2027. Unless the government legislates again, installations from 1 April 2027 go back to 5%. For a household that is a 5-point difference; for a charity planning a building used solely for charitable purposes it is the difference between 0% and 5% on the whole installation, which is why charities are being told to commission before April 2027.

Batteries: the 2024 change

Until 1 February 2024 a battery retrofitted to an existing array was standard-rated. Since then batteries for storing electricity are energy-saving materials in their own right, so a retrofit to a home or charitable building is zero-rated to 31 March 2027. At business premises a battery is 20%, like the panels.

The two changes people confuse with this one

• VAT on household electricity bills is 0% from 1 October 2026 to 31 March 2027 in Great Britain (announced 21 July 2026; electricity only, gas stays at 5%). That is VAT on the power you buy, not on an installation, and business electricity stays at 20%.
• The 12.5% rate that still appears in search results was a temporary hospitality rate from 1 October 2021 to 31 March 2022. The UK has three VAT rates: 20%, 5% and 0%.

What the business answer does to cash flow

A £240,000 commercial installation carries £48,000 of VAT at 20%. Under a capital purchase or green loan the business pays it at commissioning and recovers it on the next return, a gap of one to four months; under hire purchase the VAT is usually paid with the deposit; under a lease or a PPA it is charged on each rental or electricity invoice and recovered as it goes. The finance route changes when the VAT comes back, not whether it does.

Read next: VAT on solar panels: 20% for business, 0% for homes and charities, and business rates and solar panels for the other tax that is not charged on the array.