Industry urges government to keep VAT relief on energy-saving measures

29 July 2026

Almost 50 organisations are urging the government to extend the 0% VAT rate on the installation of energy-saving home improvements, warning that ending the relief next spring could discourage households from investing in measures that cut energy use.

The letter, published by the Sustainable Energy Association (SEA), has been sent to Prime Minister Andy Burnham and the Chancellor. It asks ministers to extend the current VAT exemption on energy-saving materials beyond its planned end date of 31 March 2027.

The exemption applies to the installation of measures including insulation, draught proofing, heating controls, solar panels, battery storage and low-carbon heating systems such as heat pumps and wood-fuelled boilers.

The SEA says the tax relief has helped reduce the upfront cost of energy efficiency improvements for households and landlords across Great Britain. It argues that allowing the exemption to expire could create uncertainty in the sector and reduce demand for installations.

The letter comes after the new government removed the 5% VAT rate from electricity bills. The SEA welcomed that move but said further action was needed to support lower household energy costs and improve the energy efficiency of homes.

The association says maintaining the VAT exemption would support the government’s Warm Homes Plan and wider efforts to decarbonise domestic heating.

It also points to the latest progress report from the UK’s independent climate advisers, which said faster electrification of home heating would help reduce household energy bills. The report noted that the rate of heat pump installations had slowed, leaving more households exposed to fluctuations in fossil fuel prices.

Read the letter here.