Rishi Sunak cuts VAT on energy-saving devices and it could save homeowners hundreds

Rishi Sunak today announced that VAT on energy-saving devices for the home will be cut to zero. This change, revealed in the chancellor’s spring statement, will reduce the cost of installing solar panels.

It will also make it cheaper to install other energy-efficient measures such as insulation, wind and water turbines, and heat pumps. Sunak laid out his plans today in a mini-budget amid rising energy, food, and fuel costs.

solar panels on house roof

Image credit: Getty images / Leoniek Van Der Vliet / EyeEm

Rishi Sunak slashes VAT on solar panels

‘As energy costs rise, we know that energy efficiency will make a big difference to bills,’ Rishi Sunak told MPs today. ‘I can announce for the next five years, homeowners having materials like solar panels, heat pumps, or insulation installed will no longer pay 5% VAT– they will pay zero.’

As Martin Lewis said in a tweet, this is great for those who can afford it, but not a help in the immediate crisis. The cost of living crisis has left many looking for ways to save energy at home.

While it will encourage some homeowners to go green, eco-home improvements like solar panels will remain out of reach for the majority.

switch energy tariff 1

Image credit: Simon Whitmore

What does this mean for the cost of installing solar panels?

A premium panel, the LG NeON R costs £3,180 for ten panels, plus installation. They would cost £159 less than this, at 3,021 without the 5% VAT.

If you opt for a small area of solar panels, such as a 1kW system, which takes around eight square metres of roof space, this will cost around £1,840. That amount of power this produces is likely to cover bills for a person living alone.

Data published by Ofgem showed that the average UK energy bill was £95 per month, or £1,138 a year in September 2021. Prices are set to go up on April 1st when the energy price cap rises.

This means an eco-alternative like solar panels and a heat pump could mean huge savings.

Which energy-efficient measures does the VAT cut affect?

  1. Heat pumps
  2. Insulation
  3. Wind turbines

Improving our home’s ability to retain heat with insulation is one other way to reduce bills.

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