Households in the UK will pay VAT on rooftop solar again from next spring. In his first budget on 28 October, Chancellor John Healey chose not to extend the zero rate on energy-saving materials installed in homes, which covers solar panels, home batteries, heat pumps and insulation. From 1 April 2027, all qualifying installations go back to the reduced rate of 5 percent.
UK – Solar to take starring role at Royal & Derngate theatre
The change will add around £500 to a typical £10,000 solar and battery system. In itself, the rise may be small, but it comes on top of cuts to the main programme that helps households fund home energy upgrades. With the deadline now fixed, installers can expect a rush of orders before the deadline and a slower market once April arrives.
The Warm Homes Plan
The Warm Homes Plan, one of the last big policies of Keir Starmer’s government, was meant to provide £15 billion in grants and loans by the end of the decade, helping up to five million households pay for heat pumps, rooftop solar, batteries and insulation. Now, the first budget under the new government cuts £1 billion from it to help cover defence spending. Funding for the boiler upgrade scheme, which pays towards heat pumps, is held at £400 million in 2027–28, around £800 million less over three years than previously planned. Analysts told Carbon Brief that could mean around 100,000 fewer heat pumps, and the cut adds to questions from climate groups about how far Burnham’s government will go to back household clean energy.
The budget documents point to yet more reductions. A new £4.7 billion “your first home” scheme is being funded partly with money previously earmarked for energy loans, and analysts estimate this could shrink the Warm Homes Plan to as little as £9 billion.
The cuts came only a day after the government launched its warm homes loan scheme, offering households interest-free and low-interest loans of £7,500 to £35,000 for solar, batteries and heat pumps. According to the government, a home with all three could save £550 a year, or up to £800 on a time-of-use tariff.
Bills first
Healey put lower bills first, with clean power as the long-term answer. Households get a £100 council tax rebate in bands A to D in England, the gas standing charge is being scrapped, and the VAT cut on household electricity bills now runs until July 2027. No new policy costs will be added to bills until a cost-control framework is in place in 2027.
For utility-scale solar, new clean power projects will only be procured if they lower bills and can connect to the grid easily. The government expects the next contracts for difference auction, AR8, to meet both conditions.
The reaction
Outside parliament, the reaction from climate groups was largely critical. Innovation charity Nesta called the reduced heat pump funding a backward step, and campaign group Electrify Britain described the budget as a disappointment for electrification. E3G, which had set out four tests for the budget, criticised the cut to loan funding, saying households and businesses need certainty before they invest. The budget also fell short on most of the think tank’s other tests. There is no general shift of levies from electricity bills into taxation, the government welcomed the approval of the Jackdaw gas field, and budget forecasts assume the Rosebank oil field will go ahead.
Burnham’s green record so far
Four months into Andy Burnham’s premiership, his record on clean energy is mixed. For supporters of clean energy, his new government is putting public money back into the grid through Great British Grid, has set up an energy wealth fund to invest North Sea revenues in low-carbon infrastructure, and has kept AR8 on track. Healey also told parliament the government remains “unshakably committed to net-zero”.
Why home batteries live or die by the tariff
At the same time, home energy upgrades have been cut to fund defence, VAT relief on home solar is ending and new gas production is being approved. The Conservatives and Reform UK, like populist parties elsewhere in Europe, argue that net zero targets should be dropped altogether to cut bills. Burnham’s government is betting that cheaper clean power will win that argument, but this budget suggests that support will go mainly to utility-scale projects, while households get less help to go solar. (TF)
