VAT on solar panels · Updated 12 May 2026

VAT on solar panels in the UK (2026)

VAT on solar panels in the UK falls into three regimes in 2026: 0% on residential installations until 31 March 2027, 20% on commercial installations (fully reclaimable for VAT-registered businesses), and 5% on qualifying charity-owned buildings. Plus the construction reverse charge for B2B installation services. This is the comprehensive 2026 guide.

UK VAT position on solar — May 2026 snapshot

Installation type	VAT rate (2026)	Reclaimable?	Expires
Residential (dwellings)	0%	N/A (no VAT charged)	31 March 2027
Commercial property	20%	Yes — fully reclaimable for VAT-registered businesses	Permanent
Charity-owned buildings (qualifying)	5% reduced rate	N/A (single composite supply)	Permanent (subject to VAT Notice 708/6 conditions)
Mixed-use property (e.g. pub with letting rooms)	Apportioned	Partial — commercial portion reclaimable	Permanent (rules per HMRC partial exemption)

Residential 0% VAT rate (2022-2027)

The 0% VAT rate on energy-saving materials installed in or on dwellings was introduced from 1 April 2022 in response to the cost-of-living energy crisis. It applies to:

• Solar PV panels and supporting equipment (inverters, mounting, cabling)
• Solar water heating (solar thermal)
• Wind turbines (residential scale)
• Water turbines (residential scale)
• Air source heat pumps (ASHP)
• Ground source heat pumps (GSHP)
• Battery storage (since 1 February 2024 extension)
• Heating controls and insulation

The rate covers both the installation labour and the installed materials as a single composite supply. The customer pays 0% VAT on the total invoice — no VAT is charged. The installer accounts for input VAT on goods and labour but doesn't add output VAT.

Eligibility conditions:

• The installation must be in or on a residential dwelling (defined per VAT Notice 708/6)
• The supplier must be VAT-registered
• The customer can be any individual or any organisation (the rate is product-based, not customer-based)
• The customer doesn't need to be the property owner — tenants installing with landlord permission qualify

What doesn't qualify for 0% residential VAT:

• Commercial premises — even mixed-use property's commercial portion is excluded
• Standalone product purchases (e.g. buying panels online for self-install) — the rate applies to combined supply only
• Maintenance contracts and ongoing service — only initial installation qualifies
• Repairs to existing installations — initial install only

Commercial 20% VAT (fully reclaimable)

Commercial solar installations attract the standard 20% VAT rate. For VAT-registered businesses this is fully reclaimable through normal VAT return mechanics — net VAT impact is zero. Practical example:

Pre-VAT capex	£100,000
VAT charged (20%)	£20,000
Total installer invoice	£120,000
VAT reclaimed via next VAT return	£20,000
Net cash impact of VAT	£0

For non-VAT-registered businesses (typically turnover under £85,000), the £20,000 VAT is a real permanent cost. This often pushes such businesses towards voluntary VAT registration ahead of a major solar project. Speak to your accountant before committing — voluntary registration has wider implications.

What's included in the commercial 20% VAT base:

• Solar PV panels
• Inverters and DC-AC conversion equipment
• Mounting, racking and ballast
• DC and AC cabling and isolators
• Battery storage (where installed)
• Monitoring equipment
• Installation labour and project management
• Scaffolding (whether by installer or third party)
• Commissioning and testing

Charity 5% reduced rate (VAT Notice 708/6)

HMRC's VAT Notice 708/6 allows registered charities to access a reduced 5% VAT rate on qualifying solar PV and energy-saving material installations. Conditions:

• The buyer must be a registered charity with the Charity Commission for England & Wales, OSCR (Scotland), Charity Commission for Northern Ireland, or HMRC-recognised equivalent
• The installation must be in or on a charitable building — registered charity ownership essential
• The work must connect to the charitable activity — pure commercial activities of a charity (e.g. charity shop's office for commercial operations) don't qualify
• The 5% rate covers both labour and materials as a single composite supply (no separate VAT on each element)

This is a meaningful saving for eligible charities. On a £100,000 installation:

• Standard 20% VAT: £20,000 added (reclaimable if VAT-registered)
• Reduced 5% VAT: £5,000 added — material saving for non-VAT-registered or partially-exempt charities

Excluded:

• Maintenance contracts (separate VAT treatment)
• Repairs to existing solar systems
• Pure commercial trading activities of the charity
• Charity trading subsidiaries (these are normally separate taxable companies)

VAT reverse charge for construction services (March 2021+)

From 1 March 2021, the VAT domestic reverse charge for construction services applies to most B2B solar PV installation services. Under reverse charge:

• The installer does not charge VAT on the invoice
• The customer self-accounts for VAT through their own VAT return (both input and output VAT recorded)
• Net VAT impact: zero for the customer (assuming full input VAT recovery)
• Cash-flow impact: positive for customer (no upfront VAT to pay), neutral for HMRC overall

When reverse charge applies:

• Both supplier and customer are VAT-registered in the UK
• Both are registered under the Construction Industry Scheme (CIS)
• The customer is not the end consumer (not for own use)
• The supply is of construction services within the meaning of the CIS

When standard VAT applies (reverse charge doesn't):

• Supplies to end-user customers (for own use, not onward supply)
• Supplies to non-VAT-registered customers
• Supplies to customers outside the CIS regime
• Material-only supplies (no installation services)

For most commercial solar installations supplied directly to the property owner for their own use, the reverse charge doesn't apply and standard 20% VAT mechanics continue. The reverse charge primarily affects developer-led solar installations as part of broader construction projects.

VAT on Smart Export Guarantee income

SEG income is a supply of electricity to the licensed Ofgem supplier. VAT treatment depends on the generator:

• Commercial VAT-registered generator: SEG income is subject to standard 20% VAT. Most commercial SEG suppliers issue self-billing invoices that calculate and pay the VAT amount. The generator declares output VAT through their VAT return.
• Private domestic generator: SEG income is zero-rated under VAT Notice 708/6 because the supply is from a non-business individual.
• Charity generator operating commercially: Depends on the specific commercial activity. Get charity VAT specialist advice.

VAT on battery storage

Battery storage VAT treatment depends on installation context:

• Residential battery installed concurrently with new solar PV: 0% VAT under the residential extension
• Standalone residential battery (no concurrent solar): 0% VAT since 1 February 2024 extension (was 20% before)
• Commercial battery storage: 20% VAT (reclaimable for VAT-registered businesses)
• Charity battery storage: 5% reduced rate if qualifying under VAT Notice 708/6

The 31 March 2027 expiry — what happens next?

The residential 0% VAT rate is scheduled to expire on 31 March 2027 under current legislation. From 1 April 2027, the previous 5% reduced rate would apply unless government extends or makes permanent. Industry positions in 2026:

• Solar Energy UK: Lobbying for permanent 0% on residential energy-saving materials
• MCS / RECC / Solar Trade Association: Supporting trade body submissions for permanent extension
• HM Treasury: No public commitment to extension; tax revenue implications material
• Industry view: Likely extension or partial permanence in Autumn Budget 2026 or Spring Budget 2027

For commercial businesses, the residential expiry has no direct impact — commercial VAT (20% reclaimable) is unaffected. But the residential market dynamics could affect installer capacity, project pricing and ancillary services in 2027.

FAQs

VAT on solar panels · FAQs

Is there 0% VAT on solar panels in 2026?

Yes — for residential installations only. The 0% VAT rate for solar PV and battery storage on dwellings was introduced from 1 April 2022 and extended in the Spring Budget 2024 through to 31 March 2027. Commercial installations remain at the standard 20% VAT rate but are fully reclaimable for VAT-registered businesses. Some charity-owned buildings qualify for the reduced 5% rate under VAT Notice 708/6.

Does 0% VAT apply to commercial solar panels?

No. The 0% VAT rate applies only to qualifying residential energy-saving materials installed in or on dwellings. Commercial solar installations on offices, factories, warehouses, hotels, retail premises and similar attract the standard 20% VAT rate. The good news: VAT-registered businesses fully reclaim it through their normal VAT return, so net VAT impact is zero.

When does the 0% VAT solar panels extension end in 2027?

The 0% VAT rate on energy-saving materials (including solar PV, batteries and heat pumps) for residential installations expires on 31 March 2027. Without further government action, the rate reverts to the previous 5% reduced rate from 1 April 2027. The Spring Budget 2024 confirmed the extension; the Autumn Budget 2024 made no changes. Industry lobbying continues for permanent 0%.

How does the 5% charity VAT rate work?

Some UK charities qualify for the reduced 5% VAT rate on solar installations under HMRC's VAT Notice 708/6. Conditions: (a) the buyer must be a registered charity, (b) the installation must be in or on a charitable building, (c) the work must be connected to the charitable activity. Pure commercial activities of a charity (e.g. a charity shop's commercial premises) don't qualify. The 5% rate covers both the materials and the installation labour as a combined supply.

What is the VAT reverse charge for solar installation?

From 1 March 2021, construction services (including solar PV installation) supplied to VAT-registered businesses fall under the VAT domestic reverse charge for construction. The installer doesn't charge VAT; instead, the customer self-accounts for VAT through their own VAT return. This affects cashflow but doesn't change the total tax position. The reverse charge applies only between VAT-registered businesses — installations supplied to end-user customers continue under the standard VAT mechanism.

Can I reclaim VAT on a £100,000 commercial solar installation?

Yes if you're VAT-registered. The installer charges 20% VAT (£20,000); you reclaim it through your next VAT return. Net VAT impact: zero. The £20,000 is recoverable cash, not a permanent cost. For non-VAT-registered businesses (turnover under £85,000), the £20,000 VAT is a real cost — often the deciding factor in voluntary VAT registration ahead of a major solar project.

Are SEG payments subject to VAT?

Yes for VAT-registered commercial generators. Smart Export Guarantee income is a supply of electricity to the licensed supplier and falls within the standard VAT regime. Most commercial SEG suppliers issue self-billing invoices that include the VAT amount. For private domestic generators, SEG income is zero-rated under VAT Notice 708/6. For charities operating commercially, get specific advice.

Does VAT apply to battery storage?

Battery storage installed at the same time as solar PV qualifies for the same VAT treatment as the solar — 0% on residential, 20% (reclaimable) on commercial, 5% on qualifying charity installations. Battery storage installed alone (not concurrent with new solar) was originally 20% for residential but extended to 0% from 1 February 2024 alongside other energy-saving material reforms.