What Is the Green Home VAT Cut?

A few months ago, the Chancellor announced that the 5% VAT on green home improvements will be cut. This marks Another Government Green Initiative that has been launched in the past few years, which should make it easier for households to invest in sustainable technology. The change means that items such as solar panels and Green Heating Systems will likely become more affordable and more accessible. 

Revealed during this year’s Spring Statement, the VAT cut began in April 2022 with the government stating the following: 

“This measure introduces a zero-rate of VAT for the installation of certain Energy Saving Materials in residential accommodation in Great Britain until 31 March 2027.” 

What this means is that there will no longer be a 5% VAT tax on energy efficient products like insulation or Heat Controls, among several others. This includes tax relief on the purchase of Energy Saving Materials (ESMs) as well as the installation costs of green home improvements. The government has claimed that this could lead to tax savings of up to £1,000, followed by annual savings of up to £300 in bill reductions. 

Are government green initiatives doing enough? 

While the news has been welcomed by industry experts to increase demand for ESMs, there have also been some criticisms.  

For instance, the claim that £1,000 in savings could be made has been scrutinised. One of the most expensive ESMs, solar panels, are often less than £10,000, meaning that £500 is a more accurate maximum saving. Moreover, given the current Cost of Living Crisis, many fear that this government green initiative simply isn’t providing enough support to encourage green home improvements. 

Rising energy bills make the likelihood of households seeking long-term ESM upgrades far smaller, as the capital needed for the initial investment isn’t there. Thus, many believe that the VAT cut should only be start of such a plan, with the new windfall tax on unsustainable fuel providers a crucial next step. 

Green Heating by Wiser 

Our heating controls and Smart TRVs are frequently included in Government Green Home Schemes, and for good reason. Not only do we make it Easy to Install a green heating solution, but our systems can also produce excellent Energy Savings of up to £450 a Year.  

So, for more information, find your ideal solution using our Product Selector Here.