CIS, VAT and MTD, 29 October 2026
VAT on heat pumps, solar and EV chargers
Installing a heat pump, solar panels, a home battery or a smart diverter in someone's home is zero-rated for VAT until 31 March 2027, then 5% from 1 April 2027. The relief covers the installation, and the kit when the installer supplies it. A home EV charger fitted on its own isn't on HMRC's list, so it normally takes the standard 20% rate.
Which installs are zero-rated?
The zero rate covers a fixed list of energy-saving materials installed in residential accommodation. If the item is on the list and you fit it in a home, the labour and the materials you supply go out at 0%.
HMRC's list in VAT Notice 708/6:
| Material | Zero rate in homes |
|---|---|
| Air source and ground source heat pumps | Until 31 March 2027 |
| Water source heat pumps | From 1 February 2024 to 31 March 2027 |
| Solar panels (PV and solar thermal) | Until 31 March 2027 |
| Batteries for storing electricity | From 1 February 2024 to 31 March 2027 |
| Smart diverters | From 1 February 2024 to 31 March 2027 |
| Insulation, draught stripping, heating controls | Until 31 March 2027 |
| Wind and water turbines, micro CHP, wood-fuelled boilers | Until 31 March 2027 |
Batteries qualify whether you retrofit one to an existing solar system, fit a standalone battery charging from the grid, or install it with new panels. Fitted as part of a new solar install, the battery normally forms part of one zero-rated supply.
"Residential accommodation" is wider than houses and flats. It includes care homes, children's homes, student accommodation, self-catering holiday lets and permanently habitable caravans. From 1 February 2024 it also covers buildings used solely for a relevant charitable purpose, such as a village hall. Hotels, inns, hospitals and prisons stay at the standard rate.
Is a whole heat pump system zero-rated, or only the unit?
The whole system, when the heat pump is the main thing you're supplying. HMRC's own example says a central heating system with a heat pump instead of a boiler is a single zero-rated supply, because the principal elements are zero-rated. The cylinder, pipework and radiators you fit with it ride along at 0%.
A conventional boiler is the opposite. Gas and oil boilers aren't on the list, so a new central heating system with a gas boiler is standard-rated, unless it's grant-funded for a qualifying person (below).
Air conditioning catches some firms out. HMRC says its understanding is that most air conditioning units are air source heat pumps, and only permanently fixed units qualify, not portable ones. So a fixed split unit in a bedroom can be zero-rated. Where there's doubt, HMRC decides on the facts, so keep the spec sheet with the job file.
Oil boiler swapped for an air source heat pump, detached house in Norfolk
The house is on oil with no mains gas. The installer quotes the full system: 9 kW air source heat pump, new cylinder, three radiator upgrades and controls.
| Heat pump system, supplied and fittedsingle supply | £14,200 |
| VAT at 0%heat pump is the principal element | £0 |
| Boiler Upgrade Scheme grant£7,500 + £1,500 off-gas top-up | −£9,000 |
| Customer pays£14,200 − £9,000 | £5,200 |
| Same price if the work fell after 31 March 2027£14,200 × 5% VAT | +£710 |
What about EV chargers?
A home EV charger fitted on its own is standard-rated at 20%. Chargers aren't on the energy-saving materials list, and when an installer asked HMRC whether a replacement charger for a customer on Motability qualified, HMRC's answer was that a charger supplied on its own isn't covered by the relief.
New homes are different. On 26 August 2026 HMRC added electric vehicle charging points to the zero-rated items in VAT Notice 708 for dwellings, so a charge point built into a new house by the builder constructing it is zero-rated along with the other building materials.
When you fit a charger on the same visit as solar or a battery, price it as its own line at 20%. That keeps the invoice clean and is the safe reading of the guidance.
Solar, battery and EV charger on one visit, semi-detached house
One job, two rates. The charger is priced separately.
| 4 kW solar PV, fittedzero-rated | £6,900 |
| 5 kWh battery, fitted with the panelszero-rated | £3,000 |
| VAT on solar and battery£9,900 × 0% | £0 |
| 7 kW EV charger, fittedstandard-rated | £1,500 |
| VAT on the charger£1,500 × 20% | £300 |
| Invoice total£9,900 + £1,500 + £300 | £11,700 |
The government's chargepoint grants changed on 1 April 2026: the flats and renters grant and the residential landlord grant now pay up to £500 per socket, until 31 March 2027. Installers make the claim, with photos of the charger, its serial number and the parking space.
When does the 5% reduced rate apply?
Two cases. From 1 April 2027 every energy-saving material on the list moves from 0% to 5%. And right now, grant-funded heating for a qualifying person is reduced-rated at 5%.
A qualifying person is someone aged 60 or over, or receiving one of the listed benefits, such as Housing Benefit, income-based Jobseeker's Allowance or Working Tax Credit. The work must be in their only or main home and paid for by a grant scheme aimed at low-income homes. The 5% covers gas and oil boilers, radiators, storage heaters, central heating repairs, and reconnecting mains gas. Any top-up the customer pays themselves is standard-rated, so apportion the bill.
Does the reverse charge apply when you work for a builder?
Not while the work is zero-rated. The domestic reverse charge covers standard-rated and reduced-rated building services, so a heat pump or solar install you do as a subcontractor for a VAT-registered builder goes out at 0% with no reverse charge wording.
That changes on 1 April 2027. Once the same install is at 5%, and both of you are VAT-registered and the payment goes through CIS, the reverse charge will normally apply unless the builder is the end user. Set up your invoice template before then: see reverse charge invoice wording.
Use the quick check before you invoice
Run any install through this before the invoice goes out.
Invoice at 0%. Itemise anything not on the list, such as an EV charger, at 20%.
From 1 April 2027 the relief drops to 5%. If you're a subcontractor to a VAT-registered builder, check whether the reverse charge applies.
Gas boilers, EV chargers and most other kit are 20%, unless it's grant-funded heating for a qualifying person (5%) or part of building a new home (0%).
Supply-only kit and work in business premises fall outside the relief.
Do the rules differ in Scotland, Wales and Northern Ireland?
The VAT rules are UK-wide, with one timing difference: Northern Ireland's zero rate started on 1 May 2023, a year later than Great Britain's. It ends on the same date, 31 March 2027.
Grants are where the nations split. The Boiler Upgrade Scheme covers England and Wales only, and the installer, who must be MCS-certified, applies and takes the grant off the price. So a heat pump customer in Northern Ireland gets 0% VAT but no Boiler Upgrade Scheme grant off the price.
Where Nexley fits
Nexley is the AI back office for UK trade firms: five AI assistants run your tenders, quotes, buying, scheduling and invoicing. It connects to the tools you already work in, you run it all from WhatsApp, and you approve everything. £799 a month.
For VAT, Nexley drafts each invoice with the rate set by line, so a solar and battery job goes out at 0% with the EV charger at 20% on the same document, and a subcontract job for a builder gets reverse charge wording when it applies. You send a voice note or a photo of the job sheet over WhatsApp, Nexley drafts the invoice, and you approve it before it goes.
Common questions
Is VAT on heat pumps going up in 2027?
Yes. The zero rate ends on 31 March 2027 and the installation of energy-saving materials moves to the reduced rate of 5% from 1 April 2027. Quotes for jobs that may finish after that date should say which rate applies.
Is air conditioning zero-rated?
Often. HMRC treats most fixed air conditioning units as air source heat pumps, so a fixed unit installed in a home can be zero-rated. Portable units, and anything in business premises, are standard-rated.
Can I zero-rate a battery added to an existing solar system?
Yes, from 1 February 2024. Retrofitting a battery to solar, a standalone battery charged from the grid, and a battery charged from both all qualify when installed in a home.
Is a heat pump in an office or shop zero-rated?
No. The relief covers residential accommodation and buildings used solely for a relevant charitable purpose. A heat pump in commercial premises is standard-rated, and the reverse charge may apply if you're working for a VAT-registered contractor under CIS.
Should I check this with an accountant?
For anything mixed, grant-funded or straddling 1 April 2027, yes. This guide sets out HMRC's published rules; your accountant can confirm the treatment on a specific job.
Sources
- GOV.UK: Energy-saving materials and heating equipment (VAT Notice 708/6)
- GOV.UK: HMRC manual VENSAV2083, VAT rates for energy-saving materials with dates
- GOV.UK: Buildings and construction (VAT Notice 708)
- HMRC Community Forums: VAT on a replacement EV charger
- GOV.UK: Apply for the Boiler Upgrade Scheme, what you can get
- Ofgem: Boiler Upgrade Scheme for property owners
- GOV.UK: Changes to EV chargepoint grant schemes from 1 April 2026
- GOV.UK: VAT domestic reverse charge for building and construction services
Every rule, rate and date above was checked against these sources on the date shown at the top.
Topic: CIS, VAT and MTD
Keep reading
CIS, VAT and MTD
CIS for subcontractors and contractors: how it works
CIS decides how much of every subcontract invoice reaches the bank and how much goes to HMRC. Here's how it works from both sides, with a worked invoice and a calculator for your own figures.
CIS, VAT and MTD
VAT domestic reverse charge: does it apply to my invoice?
Five questions decide whether your invoice charges VAT or says "reverse charge". Run the quick check, then see four real-shaped trade invoices worked through and the wording to put on yours.
CIS, VAT and MTD
VAT on domestic vs commercial building work: which rate and when
Whether the client is a homeowner or a business doesn't decide the VAT rate. The type of work does. Run the quick check, then see a worked loft-and-solar quote split across two rates.
