As announced by HM Treasury in December last year, VAT has been removed on all battery storage installations until 2027, not just those that are installed at the same time as solar panels as was previously the case. This will cut the cost of battery technology for homeowners by 20%.
The battery storage sector saw strong growth in 2023. At the end of 2022, the first year that MCS-certified battery installations were registered, there were 50 companies certified for installation. By the end of 2023 there were more than 900 certified installers, and the annual installation count had increased by more than 1700%.
The MCS Foundation, which has campaigned for the zero-rating of VAT for battery storage as well as other renewable technologies, says the zero-VAT will support the continued growth of the battery, ground-source heat pump, and renewables sector.
Financial Secretary to the Treasury, Nigel Huddleston MP, said: “Tackling climate change is vital for the UK’s long term economic prosperity and our energy security. Thanks to the Windsor Framework, we can introduce innovative measures like zero-rated VAT on heat pumps across the UK, helping to cut costs and improve energy independence for homeowners.
“The UK has a world leading track record of delivery on decarbonisation, and the results speak for themselves as we’ve reduced emissions by 48% since 1990, faster than any G7 country.”
David Cowdrey, Director of External Affairs at the MCS Foundation, said: “Battery storage will play a vital role in reducing bills and decarbonising our homes. The zero-rating of VAT which comes into effect today will support more households to install batteries and is a positive step forward.
“In order to ensure continued growth in renewables being installed in UK homes, the Treasury should be planning to extend the zero-rating of VAT until 2030 to really support these new renewable businesses.”
Bean Beanland, Director of Growth and External Affairs at the Heat Pump Federation, said: “Homeowners can now invest in ground- and safe in the knowledge that the zero-rate VAT benefit extends equally to all heat pump technologies.
“In addition, the clarifications contained in the revised pertinent VAT Notice 708/6 will allow heat pump contractors to apply best practice with respect to lowering system flow temperatures, in the full understanding that emitter upgrades of all types can be included in the concessionary contracts.
“This package is one more element in the raft of supportive policy initiatives that are required to drive forward the decarbonisation of domestic heat as a very significant contributor to the UK’s Net Zero aspirations.”
Jason Howlett, Chief Executive Officer at GivEnergy, said: “The government has made the right move in extending tax relief on battery storage systems. Energy storage is critical if we are to achieve net zero and reducing the strain and impact on our grid.
“The Zero rating of VAT will now reduce costs by up to 20% on existing solar installations and rightly acknowledges the important role that energy storage has to play in fostering energy independence for households and shifting to a more resilient grid.”
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