UK households race to beat April VAT hike on heat pumps and solar

From 1 April, the government will scrap the 5% VAT exemption on home heat pumps, solar panels and batteries. The Liberal Democrats calculate that a household fitting an air-source heat pump, a 4KW solar array and a home battery faces an extra £1,530 unless the work is done before the deadline. Ministers are under growing pressure to reverse the plan.

Charlotte Lee, chief executive of the Heat Pump Association UK, said the abrupt change risks "creating a rush of applications ahead of April, disrupting the supply chain and making the process less predictable for consumers." She argued the savings to government must be weighed against the risk of disrupting consumers, undermining industry confidence and stalling an emerging market. Her trade body is chasing clarity on how the reintroduced VAT will apply if a pre-booked installation slips past the deadline, so households don't get an unexpected bill.

The warning lands amid record demand for fossil fuel alternatives. Since the Middle East war doubled gas market prices across Europe, home energy bills have climbed to near four-year highs, driving interest in home energy upgrades to record levels. At the same time, the chancellor's budget statement signalled plans to shrink the total heat pump grant pot for the coming financial year and cut the extra grant funding offered to heating oil users.

Pippa Heylings, the Liberal Democrats' spokesperson for Energy Security and Net Zero, called the rollback "total policy madness," saying the government stripped VAT from electricity bills with one hand and slapped it back onto heat pumps with the other. "They are telling families to switch to clean electricity, while simultaneously punishing them with a £1,530 tax hike for buying the very kit needed to do so," she said, urging ministers to urgently reverse the "shortsighted heat pump tax."

Chris Hewett, chief executive of Solar Energy UK, said the rise would "raise the cost of the loans scheme that has only just been launched" and conflict with the government's aim of getting more people onto home solar and batteries. With domestic electricity bills zero-rated until July next year, he said saving energy will be taxed more heavily than consuming it, calling it a perverse incentive.

A Department for Energy Security and Net Zero spokesperson pointed to record numbers of people applying for heat pumps and receiving grants through the Boiler Upgrade Scheme in September. The department said it is driving forward electrification and the clean tech market, protecting support for low-income families, and launching a warm homes loan scheme so households can buy heat pumps, solar panels and batteries at no upfront cost.