The UK is scrapping VAT on energy saving materials installed in homes. UK homeowners who install materials and technologies such as heat pumps, solar panels and insulating materials will not incur VAT for the next five years. Energy savings materials will be zero rated for five years. After that, such materials will be subject to a reduced VAT rate of 5%.
Chancellor Rishi Sunak announced the VAT cuts in his 2022 Spring Statement. Sunak said that the move aims to “help households improve energy efficiency and keep energy costs down – as well as supporting the UK’s long-term Net Zero ambitions.”
VAT to boost a green economy
UK lawmakers previously called on government to cut VAT to support a green recovery. VAT cuts on insulation and energy-efficient household technology is in line with parliamentary Environmental Audit Committee (EAC) recommendations.
According to policymakers, lower VAT will both help meet climate goals and boost the post-lockdown economic recovery.
The UK government has set an ambitious net zero carbon target for 2050.
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