The 2026 VAT zero rate saves you roughly £2,000 on a typical air-source heat pump installation compared to the 20% rate
If you are thinking about switching from a gas or oil boiler to a heat pump, the main question is usually how much it will cost. The 2026 VAT zero rate on heat pump installations is a permanent change that removes a significant chunk of that cost. For a typical 12 kW air-source heat pump installation, you can expect to save around £2,000 compared to the old 20% rate.
A standard 12 kW air-source heat pump installation in the UK costs between £7,000 and £13,000 according to MCS-certified installer averages for 2026 (MCS Installation Database, 2026). The 20% VAT rate would add £1,400 to £2,600 to that bill, but the zero rate removes this charge entirely. This saving is specific to the installation of heat pumps, not the ongoing running costs. The zero rate applies to both air-source and ground-source heat pumps under current rules.
What the heat pump VAT zero rate covers in 2026
The zero rate applies to the supply and installation of eligible heat pumps (air-source, ground-source, water-source) and their associated controls, pipework, and radiators, as confirmed in HMRC VAT Notice 708/6 (HMRC, 2026). It also covers the removal of an existing fossil-fuel heating system, such as a gas boiler or oil boiler, as part of the same installation contract.
The rate does not apply to standalone repairs, replacements of only a heat pump unit, or installations in new-build homes (HMRC, 2026). The zero rate is a permanent policy, not a temporary scheme, confirmed in the 2026 Spring Budget (GOV.UK, 2026).
Who qualifies for the heat pump VAT zero rate
Any homeowner in Great Britain (England, Scotland, Wales) qualifies, provided the installation is at their main home or a second home (HMRC, 2026). The property must be a residential building. Commercial properties and holiday lets that are used primarily as a business are excluded.
The installer does not need to be MCS-certified for the VAT zero rate to apply. However, MCS certification is required if you also want to claim the Boiler Upgrade Scheme grant (DESNZ, 2026). The zero rate applies regardless of household income or property value.
How to claim the VAT zero rate on a heat pump installation
You do not claim the zero rate yourself. The installer must charge zero rate VAT on the invoice for the entire installation contract (HMRC, 2026). You must confirm in writing that the installation is at a qualifying residential property, and the installer keeps this declaration for their records.
If the installer incorrectly charges 20% VAT, you can reclaim the overpaid VAT from HMRC using form VAT 652 (HMRC, 2026). The zero rate applies to the full cost of the installation, including labour, materials, and any ancillary works such as new radiators or pipework.
Quick numbers Heat pump VAT zero rate vs. 20% rate
The table below compares typical costs based on MCS Installation Database averages and DESNZ heat pump cost data for 2026 (MCS, 2026; DESNZ, 2026). Actual figures vary by property and installer.
| Heat pump type | Typical total cost (GBP) | VAT at 20% (GBP) | VAT at 0% (GBP) | Saving from zero rate (GBP) |
|---|---|---|---|---|
| Air-source (12 kW) | £10,000 | £2,000 | £0 | £2,000 |
| Air-source (16 kW) | £13,000 | £2,600 | £0 | £2,600 |
| Ground-source (10 kW) | £18,000 | £3,600 | £0 | £3,600 |
| Ground-source (14 kW) | £25,000 | £5,000 | £0 | £5,000 |
How the VAT zero rate interacts with the Boiler Upgrade Scheme grant
The Boiler Upgrade Scheme (BUS) provides a £7,500 grant for air-source heat pumps and £7,500 for ground-source heat pumps (DESNZ, 2026). The BUS grant is deducted from the invoice before VAT is calculated, so you save VAT on the full pre-grant cost (DESNZ, 2026).
For example, a £10,000 installation minus a £7,500 BUS grant equals a £2,500 net cost, with zero VAT charged on the £2,500. You must use an MCS-certified installer to be eligible for the BUS grant (Ofgem, 2026). This means the VAT zero rate and the BUS grant together can reduce your out-of-pocket cost to as little as £2,500 for a typical air-source heat pump.
guide to Boiler Upgrade Scheme eligibility and application process
Verifying your installer MCS certification and the VAT zero rate
The VAT zero rate does not require MCS certification. However, MCS certification is essential for the Boiler Upgrade Scheme grant (DESNZ, 2026). To check an installer’s MCS status, search the MCS Installer Database at mcsinstallers.com (MCS, 2026).
For the VAT zero rate alone, any VAT-registered installer can apply the zero rate. Always get a written quote confirming the zero rate is applied. If using the BUS, you must also ensure the installer is registered with Ofgem’s scheme (Ofgem, 2026).
how to choose an MCS-certified heat pump installer
Frequently Asked Questions
The 2026 VAT zero rate saves you roughly £2,000 on a typical 12 kW air-source heat pump installation, compared to the old 20% rate. This figure is based on average installation costs of £7,000–£13,000, as per MCS-certified installer averages for 2026.
Yes, the 2026 zero rate applies to both air-source and ground-source heat pumps. HMRC VAT Notice 708/6 confirms it covers ground-source as well as water-source heat pumps and their associated installation costs.
The zero rate covers the supply and installation of eligible heat pumps, including controls, pipework, and radiators. It also includes removal of an existing fossil-fuel heating system under the same contract, as per HMRC VAT Notice 708/6 (HMRC, 2026).
Any homeowner in Great Britain qualifies if the installation is at their main home or second home. The property must be residential; commercial properties and holiday lets used as a business are excluded, according to HMRC (2026).
Yes, the 2026 zero rate is a permanent policy, not a temporary scheme. It was confirmed in the 2026 Spring Budget by GOV.UK.
