0% VAT on heat pumps, solar and insulation ends on 31 March 2027. What installers should put in quotes now

Installing energy-saving materials in a home has been zero-rated for VAT since 1 May 2023. HMRC's VAT Notice 708/6 says the zero rate runs to 31 March 2027, and "from 1 April 2027 onwards these will revert to the reduced rate of VAT of 5%". If you fit heat pumps, solar panels, batteries or insulation and you are VAT-registered, any quote you write this winter may be for a job that finishes after that date.

What the zero rate covers

Section 2.7 of the notice lists the qualifying materials:

• controls for central heating and hot water systems
• draught stripping
• insulation
• solar panels
• wind and water turbines
• ground source and air source heat pumps
• micro combined heat and power units
• wood-fuelled boilers
• from 1 February 2024, batteries that store electricity, including a battery retrofitted to existing solar panels

The relief applies to installation in residential accommodation, which the notice describes as houses, flats and other dwellings, plus care homes, children's homes and similar places where people live as their main home. From 1 February 2024 it was also extended to buildings used solely for a relevant charitable purpose.

Three limits catch firms out:

1. Supply only is standard-rated. Section 2.3 says that if you supply the materials "without installing them your supply will be standard-rated". Selling a customer a heat pump for someone else to fit is 20%.
2. The installation must be the main thing. Insulation fitted as part of building an extension is "one single standard-rated supply", because the extension is the principal element. Cutting a new loft hatch so you can lay loft insulation is ancillary, so the whole job stays at 0%. A central heating system built around a heat pump instead of a boiler is a single zero-rated supply.
3. Gas boilers and glazing are not on the list. Replacement windows and double glazing are standard-rated. A gas boiler only gets 5% in the grant-funded cases in section 3 of the notice.

What 5% costs on real jobs

These figures use the same job price before VAT and show what the customer pays at each rate.

Most homeowners compare quotes on the total, so the risk sits in how you word the price. If your quote says "£11,000 including VAT" and the work is finished after 1 April 2027, VAT becomes one twenty-first of that figure. You pay HMRC £523.81 and keep £10,476.19. That £523.81 comes out of your margin, not the customer's pocket. Our VAT calculator does the same sum for any total.

Which rate applies: the tax point

The rate is fixed by the tax point, not the date you quoted. HMRC's VAT Notice 700 gives the rules for services:

• The basic tax point "is the date when the service is completed".
• If payment is received or an invoice is issued before that, the tax point is the earlier of those dates.
• If you issue an invoice within 14 days after completion, the invoice date becomes the tax point.

That gives three common cases.

A deposit before the change. You take a 25% deposit of £2,750 on the £11,000 heat pump job, invoiced and paid on 15 March 2027, and finish on 12 April 2027. The deposit has its own tax point in March, so it stays at 0%. The balance of £8,250 is at 5%, which is £412.50. The VAT on the whole job falls from £550 to £412.50.

Finished in March, invoiced in April. You complete on 29 March 2027 and send the invoice on 2 April. Under the normal 14-day rule the invoice date would be the tax point, which falls after the change. Section 88 of the VAT Act 1994 lets the supplier elect to use the rate at the basic tax point instead, which here is 0%. HMRC's manual says the choice is the supplier's alone and a customer "cannot insist" on it. Section 30 of VAT Notice 700 covers how to apply it.

Invoicing early to beat the date. An invoice or payment for work not yet done does create a tax point, but HMRC can bring in special rules around a rate change. Check HMRC's guidance for the change when it is published before you rely on early invoicing for whole jobs.

What to put in quotes now

1. Price energy-saving work before VAT, and show the VAT line separately. Our guide to how to write a quote for a job has a layout.
2. For any job that could finish after 31 March 2027, add a line such as: "VAT is charged at the rate in force at the tax point. Work completed on or after 1 April 2027 is expected to be charged at 5%."
3. Price work that is not on the list as its own line. A kitchen rewire done on the same visit as a solar install is a separate job, not part of the installation. If you are unsure whether a job is one supply or two, section 2.5 of the notice has HMRC's examples.
4. Keep the date the work was completed on the job record. It decides the rate, and it is the first thing HMRC will ask for.
5. If you are not yet registered, the change does not affect you directly. Our page on the rolling 12-month VAT threshold explains when it will.

Where Overlyft fits

Overlyft is an AI agency for small firms. It can set up an AI Quote Writer that drafts quotes from your site notes and price list and can be set to add the VAT rate line above to any energy-saving job. You check the quote and decide the VAT treatment before it goes to the customer; it does not make that decision for you.

This is general information, not tax advice. Mixed jobs, charity buildings and grant-funded work have their own rules, and an accountant or HMRC's VAT helpline can confirm the rate for a particular job.