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VAT pumps

How much VAT is on air or ground source heat pumps?

Short answer? NONE! That´s right, from April 2022 to March 2027, there is no VAT on the supply and installation of various energy-saving materials in your home. A change which, apparently, could save customers between £500 – £750 on their installation.

What is included in this zero VAT rate?

This new change regarding VAT on heat pumps (announced by the Chancellor in his Spring statement) includes:

  • Controls for central heating and hot water systems
  • Draught stripping
  • Insulation
  • Solar panels
  • Ground source heat pumps
  • Air source heat pumps
  • Micro-combined heat and power units
  • Wood-fuelled boilers
  • Wind turbines
  • Water turbines 

What’s more, the ancillary work that is required as part of the job is VAT-free as well! That is, the installation of an air source heat pump together with new radiators and pipework can be zero-rated as well. **Provided this is carried out as a single job and for a single price.    

This work is included because larger radiators and pipes are necessary as the air source heat pump operates at a lower temperature than a traditional gas boiler. The work is regarded as “one supply of an air source heat pump” and the whole job can be zero-rated so no VAT is charged!

This is great news for homeowners looking to install a heat pump, as it adds yet another reason to the ever-growing list of reasons to invest in heat pump technology right now.

Mechanical heat pump

Why invest in heat pumps now?

If the change in VAT on heat pumps isn´t enough to convince you to invest in this energy-saving measure, here are some other major benefits to switching to heat pumps:

1. Benefit from zero-rated VAT

The VAT on heat pumps has changed from 5% to zero, so take advantage of this change while you can. As well as paying zero VAT, you could also save a further  £500 – £750 on the cost of your installation.

2. Save on energy prices

We are all struggling to combat increasing energy prices, and they are only continuing to rise. Gas is increasing much faster than electricity, however, so that´s why it´s a smart decision to switch to heat pumps. They will generate significant running cost savings compared to fossil fuel alternatives. 

Lightbulb plugging a switch into a socket

3. Plan for the future

Since electricity comes from wind, solar, and nuclear sources, electricity should eventually start to decrease again and continue to get relatively cheaper. As we continue to push greener initiatives, gas and oil will be more heavily taxed as “dirty fuels,” making them ever more expensive. 

4. Claim the £5,000 Boiler Upgrade Scheme grant 

If you qualify for the ‘Boiler Upgrade Scheme,’ you can qualify for a government grant of £5,000 towards the costs of a new heat pump and radiators.  Also, some local authorities will give you a ‘Green Homes Grant’ towards energy-saving measures. Speak to your qualified fitter about this.

A few notes to bear in mind from this article…

Note 1:  Like a lot of government schemes the rules might change in the future and this is correct at this moment in time (November 2022).

Note 2:  This applies to Great Britain but not Northern Ireland where the rules are slightly different.

Note 3:  This article is a summary of the rules and should not be relied upon as formal advice. If you want bespoke and formal VAT advice then please get in touch!

Looking for more advice on this?  Get in touch!

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