Paying reduced rate VAT on energy-saving materials

When you have certain energy saving materials and equipment installed in your house, you may be charged a lower rate of VAT than normal. Your building contractor should charge these lower rates on the installation work as well as on the materials and equipment itself. If the materials and equipment go into a new house at the time of construction, you don't pay any VAT at all.

There are only certain materials and equipment that can be charged at the lower rate when installed. However, the range is wider if the job is being funded by certain grants, so it's worth seeing if you can get an appropriate grant for the installation.

Your building contractor will know what work attracts the reduced rate of VAT and will charge you at the correct rate. This guide gives you an idea of the kind of work that is charged at the lower rate.

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What qualifies for the lower rates of VAT?

Installation of any of the following qualifies for the lower rate of VAT:

  • controls for central heating and hot water systems
  • draught insulation (eg around windows and doors)
  • insulation on walls, floors, ceilings, lofts, etc
  • solar panels
  • wind turbines
  • water turbines
  • ground-source heat pumps
  • air-source heat pumps
  • micro combined heat and power units
  • wood-fuelled boilers

You can only get these lower rates if the energy saving materials are actually installed, and the work is done on your home. You'll be charged the lower rate on the installation work itself as well as the materials.

You'll also get the lower rate on any necessary extra work that needs to be done as part of the installation - this doesn't apply if you're having them installed as part of a larger project such as building a new roof or an extension, or installing a central heating system.

Read more about VAT and energy-saving materials in VAT Notice 708/6

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What doesn't qualify for the lower rate of VAT?

You can't get the lower rate of VAT on all energy saving materials and equipment. The following aren't covered by the scheme:

  • energy efficient boilers
  • secondary or double glazing
  • low emission glass
  • energy efficient fridge freezers
  • materials and equipment that you buy without having them installed

However, you may be able to get a grant towards the cost of installing energy saving equipment, some of which then becomes eligible for the lower rate of VAT.

See the section in this guide on grants for energy saving equipment.

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Grants for energy saving equipment

If you get a grant towards the installation of certain energy saving equipment, and it's being installed in your main or only home, you'll pay a lower rate of VAT.

If you're 60 or older, you'll get the lower rate on the installation, maintenance or repair of a central heating system, and a renewable source heating system.

If you get one of the following benefits, you'll get the lower rate on the installation of heating appliances such as specific types of immersion heaters, boilers, storage heaters, gas heaters and radiators:

  • child tax credit - other than the family element
  • council tax benefit
  • disability living allowance
  • personal independence payment
  • disablement pension
  • housing benefit
  • income-based job seeker's allowance
  • income support
  • war disablement pension
  • working tax credit

The reduced rate of VAT also applies to grant-funded repairs and replacements of this kind of equipment, even if the original system was not grant-funded.

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More useful links

More about how reduced VAT applies to energy saving materials in VAT Notice 708/6

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