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Chancellor cuts VAT on insulation, heat pumps and solar panels

In the Spring Statement of March 2022, then-Chancellor Rishi Sunak announced that VAT on key energy-saving home improvements would be cut from 5% to zero for five years.

This zero-rating applies to products such as solar panels, heat pumps, and roof insulation, and came into effect from April 2022. The aim was to help households make their homes more energy efficient, reduce energy bills, and support the UK’s longer-term Net Zero targets.

The Treasury clarified at the time that the 0% VAT rate applies to both materials and the cost of installation – but may not apply to DIY purchases of insulation by householders.

Sunak also announced a further £500 million for the Household Support Fund, intended to help vulnerable households cover essential costs including utilities – bringing total funding for that scheme to £1 billion since October 2021.

While these VAT changes offered a boost to households able to invest in energy-saving upgrades, critics pointed out that they did little to support those in fuel poverty, or those unable to afford the upfront cost of measures like heat pumps and solar panels.

“If that’s all he’s doing on energy – it is limited and won’t impact the majority of households who will see a likely £1,300 average increase in year-on-year bills by October.

My head has sunk. I just hope there’s a rabbit to come out of the hat. #SpringStatement2022

— Martin Lewis (@MartinSLewis) March 23, 2022
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