VAT on energy-saving products, which had benefited from a reduced VAT rate of 5%, will now be VAT free, the Chancellor has announced.
As part of the Spring Statment Rishi Sunak cut the rate to 0% blaming the fact it had not been done earlier on European red tape.
This could reduce the cost of having a solar panel installed by £1,000.
Northern Ireland will not get this because of the protocol, he said. However, he added that Northern Ireland will get equivalent funding.
The Chancellor has also extended the number of items that qualify for the relief, but this policy will be widened to apply to homeowners having materials like solar panels, heat pumps or insulation installed.
Timothy Douglas, head of policy and campaigns for Propertymark, said: “We welcome today’s announcement that VAT will be cut on the installation of energy-saving materials in residential properties.
“With rising energy costs as well as looming energy efficiency targets for the property sector, financial incentives are well needed.
“We will be scrutinising the details of this scheme as they are released to ensure they have the maximum impact for all homeowners, including investors in the private rented sector and that landlords and letting agents can take full advantage of the change.”
Chris Gardner, co-founder of the development lender Atelier, added: “With the cost of building materials surging once again, the Chancellor’s surprise tax cut on energy-saving technology offers a welcome safety valve – both to the construction industry and to homeowners looking to save money on their energy bills.
“The scrapping of VAT on vital, but still comparatively expensive, tech like solar panels and heat source pumps is a logical and popular response to the spike in energy prices that kicks in next week. But it will also offer long-term benefits to homeowners, the environment and UK energy policy.
“Every home fitted with solar panels can be one less home drawing power from Britain’s energy grid, and every home heated by an air source pump means one less boiler burning imported gas.
“While thousands of homeowners and housebuilders would fit energy-saving technology if they could, cost remains a major hurdle. The ‘green premium’ – the difference in cost between using the most energy-efficient versus conventional materials – is slowly reducing as the new technology is produced in higher quantities.
“But with building materials costs rising across the board, today’s 5% cut in the cost of energy saving technology suddenly makes it more affordable, and we look forward to running the numbers with our developer partners who want to go green.
“There’s no doubt that the market appetite for this technology is there, but developers and homeowners just need a nudge to embrace it fully, whether that’s from Government or from initiatives like Atelier’s Carbonlite Challenge, which offers significantly discounted finance to developers who use sustainable, low carbon designs.”
