The UK government ended the Green Homes Grant voucher scheme in 2021 — here is what replaced it for tax relief
The Green Homes Grant closed to new applications in March 2021 (GOV.UK, Green Homes Grant closure announcement, 2021). No direct, universal “energy efficiency tax relief” scheme currently exists for homeowners in England, Scotland, or Wales for 2026. Current support is delivered through VAT relief on specific installations, not income-tax deductions. The main replacement mechanisms are the 0% VAT rate on certain energy-saving materials and the Boiler Upgrade Scheme (England & Wales) (HMRC VAT Notice 708/6, 2026; DESNZ Boiler Upgrade Scheme guidance, 2026).
Energy efficiency tax relief UK means 0% VAT on installations of heat pumps, solar panels, and insulation by a registered business, saving £500-£1,500 per project. No income-tax deduction exists for homeowners in 2026.
- 0% VAT applies to energy-saving materials installed by a registered business.
- DIY installations attract 20% VAT on materials bought separately.
- Boiler Upgrade Scheme offers £7,500 off heat pumps in England and Wales.
- VAT relief covers solar panels, heat pumps, biomass boilers, and insulation.
- No universal income-tax deduction exists for home energy efficiency in 2026.
- The UK government ended the Green Homes Grant voucher scheme in 2021 — here is what replaced it for tax relief
- The 0% VAT rate on energy-saving materials is the primary tax relief available for homeowners in 2026
- Quick numbers — how much VAT you save per installation type
- The Boiler Upgrade Scheme is not tax relief but it is the cash alternative for heat pumps and biomass
- The direct answer — you do not get an income-tax deduction for home energy efficiency improvements in the UK
- Eligibility and installer certification — how to verify you qualify for the VAT relief
- What about the Great British Insulation Scheme — is this tax relief?
- How to apply for the 0% VAT relief — no forms, just choose the right installer
The 0% VAT rate on energy-saving materials is the primary tax relief available for homeowners in 2026
Since 1 April 2022, the installation of certain energy-saving materials (ESMs) in residential accommodation is subject to a reduced 0% VAT rate (HMRC VAT Notice 708/6, updated for 2026). This applies to materials and installation labour for solar panels, heat pumps (air, ground, water-source), biomass boilers, and insulation (cavity wall, loft, solid wall, floor, roof). The relief is available across the UK (England, Scotland, Wales, Northern Ireland) for installations by a VAT-registered business. The standard 20% VAT rate applies to materials bought by the homeowner for DIY installation — tax relief only applies to the installation labour and materials supplied by the installer (HMRC, “VAT on energy-saving materials and grant-funded heating equipment”, 2026).
Quick numbers — how much VAT you save per installation type
The table below shows typical installation costs for common energy-saving measures and the VAT saving you can expect at the 0% rate. Costs are based on DESNZ average data for 2025-26 and MCS register installer quotes (DESNZ “Energy Efficient Heating and Insulation Cost Data”, 2025-26; MCS register, 2026).
| Installation type | Typical installation cost | VAT at 20% | VAT at 0% | Your saving |
|---|---|---|---|---|
| Air source heat pump | £12,000 | £2,400 | £0 | £2,400 |
| Ground source heat pump | £24,000 | £4,800 | £0 | £4,800 |
| Solar PV panels (3.5kWp system) | £7,000 | £1,400 | £0 | £1,400 |
| Loft insulation (270mm top-up) | £500 | £100 | £0 | £100 |
| Solid wall insulation (external, 50m²) | £10,000 | £2,000 | £0 | £2,000 |
For example, an air source heat pump installation at £12,000 saves £2,400 in VAT (DESNZ average cost data, 2025-26). Loft insulation installation at £500 saves £100 in VAT (Energy Saving Trust typical cost estimates, 2026).
The Boiler Upgrade Scheme is not tax relief but it is the cash alternative for heat pumps and biomass
The Boiler Upgrade Scheme (BUS) offers a flat £7,500 grant for air source heat pumps and ground source heat pumps, and £400 for biomass boilers (GOV.UK Boiler Upgrade Scheme page, updated for 2026). The grant is deducted from the installer’s invoice, so the homeowner pays the reduced price — not a tax rebate. This grant is available in England and Wales only. Scotland has its own Home Energy Scotland loan and grant scheme; Northern Ireland has the NI Energy Advice Service. You cannot combine the BUS grant with the 0% VAT relief on the same installation — you choose one (DESNZ, “Boiler Upgrade Scheme: how to apply”, 2026).
You do not get an income-tax deduction for home energy efficiency improvements in the UK
The UK does not have a tax-deductible “energy efficiency improvement” credit against income tax or council tax for homeowners. The primary “tax relief” is the 0% VAT on installation (described above), not a deduction from your taxable income. Landlords can claim a deduction for the cost of energy efficiency improvements against rental income under the “replacement of domestic items” rule or as a capital allowance, but this is not available to owner-occupiers (HMRC Property Income Manual PIM2030, 2026). The confusion often stems from the US “Energy Efficient Home Improvement Credit” — this is not replicated in UK tax law (HMRC, “Tax on property: deductions for repairs and improvements”, 2026).
Compare the Boiler Upgrade Scheme vs VAT relief to decide which saves you more money
Eligibility and installer certification — how to verify you qualify for the VAT relief
The 0% VAT rate only applies if the installation is carried out by a VAT-registered business that is a member of a relevant competent person scheme (HMRC VAT Notice 708/6, section 2.3, 2026). For heat pumps and solar, the installer must be MCS-certified (Microgeneration Certification Scheme) — check the MCS Installer Database (mcscertified.com, 2026). For insulation, the installer should be registered with a competent person scheme such as CIGA (Cavity Insulation Guarantee Agency), BBA, or a TrustMark-registered installer (TrustMark, 2026). The homeowner must own the property (or have a long leasehold of at least 10 years remaining) and the property must be used as a dwelling (HMRC guidance “VAT on energy-saving materials: conditions for relief”, 2026).
What about the Great British Insulation Scheme — is this tax relief?
The Great British Insulation Scheme (GBIS) is a government-funded grant for loft and cavity wall insulation for lower-income households, not a tax relief (DESNZ, GBIS guidance, 2026). Eligibility is based on property council tax band (A-D in England) and household income — it is a means-tested grant, not a tax credit. It does not reduce your tax bill; it covers part or all of the insulation installation cost directly (GOV.UK “Great British Insulation Scheme: eligibility and how to apply”, 2026).
How to apply for the 0% VAT relief — no forms, just choose the right installer
There is no application form for the homeowner — the installer applies the 0% rate on their invoice if the conditions are met. The homeowner must confirm in writing (usually via a signed declaration on the installer’s paperwork) that the installation is at their home and meets the conditions. The installer must keep records of the declaration for HMRC inspection. If the installer incorrectly charges 20% VAT, the homeowner cannot reclaim the VAT from HMRC — they must ask the installer to reissue the invoice at 0% (HMRC, “VAT on energy-saving materials: how to get the relief”, 2026).
Find a certified installer for heat pumps or insulation near you
Frequently Asked Questions
Yes, primarily through a 0% VAT rate on energy-saving materials installed by a VAT-registered business, confirmed by HMRC VAT Notice 708/6. There is no direct income-tax relief for homeowners.
The VAT rate is 0% for installations of energy-saving materials like heat pumps and solar panels by a registered installer, according to HMRC. DIY purchases of materials alone are charged 20% VAT.
You can save around £1,200 on a typical £12,000 heat pump installation, based on 0% VAT versus 20%. This figure comes from MCS installer quotes and DESNZ cost data for 2025-26.
No, the Boiler Upgrade Scheme is a grant, not tax relief, offering £7,500 off heat pump installations in England and Wales (DESNZ, 2026). It is separate from VAT relief.
No, HMRC states that 0% VAT only applies when both materials and labour are supplied by a VAT-registered installer. DIY installations are subject to 20% VAT on materials.
