Solar Panel VAT Increase in 2027: What Homeowners Need to Know

Homeowners considering solar panels or battery storage should be aware of an upcoming change to VAT on qualifying domestic renewable energy installations.

Under current UK rules, eligible installations benefit from a temporary 0% VAT rate. This relief is scheduled to end on 31 March 2027, with the reduced rate of 5% due to apply from 1 April 2027.

Although this is not a return to the standard 20% VAT rate, it could add hundreds of pounds to the cost of some installations. Here’s what the change means, which systems may be affected and what homeowners should consider before making a decision.

When Will VAT on Solar Panels Increase?

The current 0% VAT rate for qualifying energy-saving installations in residential properties was introduced in April 2022. The relief was subsequently expanded in February 2024 to include electrical battery storage and smart diverters.

Under the rules currently in force, the zero rate is due to end on 31 March 2027. From 1 April 2027, qualifying installations are scheduled to return to the reduced VAT rate of 5%.

The distinction is important. This is a change from 0% to 5%, rather than an increase to 20% for eligible domestic installations.

The timetable reflects the legislation and HMRC guidance currently in force. Homeowners should check for any subsequent Government announcements before arranging an installation.

You can also read our guide on other solar incentives available.

How Much More Could a Solar Installation Cost?

The financial impact will depend on the price and specification of the system being installed. With VAT returning to 5%, the additional cost would be equivalent to 5% of the qualifying price before VAT, assuming that the underlying price remains unchanged.

The examples below illustrate how that could affect different installation budgets.

Installation price before VAT	VAT at 0%	VAT at 5%	Difference
£4,000	£0	£200	£200
£6,000	£0	£300	£300
£8,000	£0	£400	£400
£12,000	£0	£600	£600

These figures are illustrations rather than quoted or typical market prices. Actual costs will depend on the equipment, installation requirements and the price agreed with the installer.

For households considering a combined solar and battery system, the additional VAT could be more noticeable because the overall installation price is higher. However, the exact difference will depend on the system chosen and the VAT treatment that applies.

It is also worth remembering that VAT is only one part of the overall cost of going solar. System design, expected electricity use, installation quality and potential savings on electricity bills should all inform the decision.

Which Installations are Covered by the VAT Change?

The zero-rate relief applies to qualifying installations of specified energy-saving materials in eligible residential accommodation. Solar panels and electrical battery storage are among the technologies covered.

For homeowners, this can include:

• Solar panel installations: qualifying domestic solar PV systems supplied and installed by an installer.
• Home battery storage: eligible battery installations, including batteries added to an existing solar system. If you’re considering battery storage for your installation, read our guide on choosing the right battery size for you.
• Smart diverters: qualifying devices that direct surplus electricity towards uses such as water heating.

Eligibility depends on the nature of the supply and installation, rather than simply the product being described as energy-saving.

If a homeowner purchases solar panels or battery storage equipment separately from a retailer, the equipment purchase itself is subject to the standard rate of VAT. However, the installation service may still qualify for the 0% VAT rate, provided it meets HMRC’s eligibility requirements. This means homeowners who have sourced their own equipment may still benefit from the relief on the cost of having it professionally installed.

Commercial and agricultural projects may also fall under different VAT rules, depending on the property, the nature of the work and the circumstances of the supply. If you’re planning a project for a business, farm or other non-domestic property, it’s important to establish the applicable VAT treatment rather than assume the domestic rules will apply.

HMRC’s VAT Notice 708/6 provides further information on qualifying materials and installation requirements.

Will Booking Before April 2027 Guarantee 0% VAT?

Not necessarily. The date you book an installation is not, by itself, a guarantee that the whole project will qualify for the current rate.

VAT treatment can depend on the applicable tax point, including when work is completed, an invoice is issued, or payment is received. Special rules can also apply when a VAT rate changes.

For this reason, homeowners planning an installation around the March 2027 deadline should discuss the timing with their installer well in advance.

Ask how the VAT rate will be applied to any deposit, stage payments and final balance, and request confirmation in writing. Do not assume that signing a contract or paying a deposit automatically fixes the VAT rate for the entire installation.

If your project is likely to run close to the deadline, allow time for the property assessment, system design, equipment arrangements and installation itself. This can help you plan realistically without relying on an uncertain completion date.

Should you Install Solar Panels Before the VAT change?

If solar panels or battery storage are already on your plans, the scheduled VAT change is a sensible reason to review your options and obtain an up-to-date quotation.

However, avoiding an additional 5% VAT charge should not be the only reason to proceed. A system needs to suit your property and energy requirements to deliver value over time.

Before committing, consider:

• Your electricity consumption: understanding when you use electricity can help determine the potential benefit of solar generation and battery storage.
• Your roof and property: available space, orientation, shading and other site conditions affect system design.
• Your storage requirements: a battery may help you use more of your own solar electricity, but the right choice depends on your circumstances.
• The full installation cost: compare the equipment, workmanship, warranties and scope of each quotation, rather than focusing solely on VAT.
• Your installation timetable: if you want the current rate to apply, confirm the relevant VAT treatment and realistic schedule with your installer.

There is no need to make a decision based on the deadline alone. A properly designed system and a clear understanding of its costs are more useful starting points than rushing into an unsuitable installation.

Planning a Solar Installation with Lincs Renewables

For homeowners across Lincolnshire and Yorkshire, the upcoming VAT change is an opportunity to review the costs of installing solar panels or adding battery storage.

At Lincs Renewables, we provide renewable energy solutions for domestic, commercial and agricultural customers. The right system will depend on your property, energy needs and objectives, so it’s worth discussing your requirements before deciding which option is best for you.

If you’re considering solar panels or battery storage, get in touch with our wonderful team to discuss your project and request a tailored quotation.

The scheduled VAT change is one factor to consider when planning an installation, but the priority should always be choosing a system that works for your property and delivers value for your needs.

VAT information in this article reflects the rules currently in force at the time of writing. The scheduled change may be affected by subsequent Government announcements, and individual VAT treatment depends on the circumstances of the supply. For further information, consult HMRC’s official guidance.

If you’d like to find out more: get in touch, call us on 01472 511487, or email us at info@lincsrenewables.co.uk.