Martin Lewis VAT rule change could cut your energy bill

The price cap will rise by £63 in October, the third increase this year. Against that backdrop, Martin Lewis has flagged a quieter change that could save homeowners hundreds: the VAT exemption on energy-saving materials, extended to five years from April 2025.

As reported by Wales Online, the change means homeowners no longer pay 20% VAT on materials like insulation, solar panels, heat pumps, and draught-proofing. The catch? It applies only to installations carried out by registered contractors, not DIY jobs.

Who qualifies, and who doesn’t

The 0% VAT rate applies to all energy-saving materials installed by a VAT-registered firm. That includes loft insulation, cavity wall insulation, solar photovoltaic panels, air-source and ground-source heat pumps, and even smart thermostats. The measure runs for five years from 1 April 2025, giving homeowners a clear window to act.

But the rule has a sting. It does not apply to materials bought directly by homeowners for self-installation. Nor does it cover boiler upgrades or double glazing, which remain at the standard 5% reduced rate. Ofgem confirmed the scope to the Energy Saving Trust last month: the exemption is for ‘installed’ materials only.

What it costs a typical 3-bed semi

For a typical 3-bed semi using 12,000 kWh of gas and 3,000 kWh of electricity annually, a full retrofit, loft insulation (£500), cavity wall insulation (£800), and an air-source heat pump (£7,500 after the Boiler Upgrade Grant), would save about £250 on VAT alone. The Energy Saving Trust estimates annual bill savings of £150–£250 after installation, depending on the property’s starting EPC rating.

Yet the upfront cost remains the barrier. A heat pump installation can run £10,000–£12,000 before grants. The VAT saving of £2,000–£2,400 helps, but the Boiler Upgrade Grant of £7,500 already covers most of that. The real win is for insulation: removing 20% VAT on a £800 cavity wall job saves £160, a tangible sum for a measure that pays back in two to three years.

EPC impact and property value

Improving from an EPC rating of D (typical for a 1970s semi) to B could add £5,000–£10,000 to the property’s value, according to Nationwide’s 2023 analysis. The VAT exemption lowers the cost of reaching that threshold. A household spending £3,000 on loft and cavity wall insulation plus a smart thermostat could see their rating jump two bands, and pay no VAT.

But the clock is ticking. The exemption ends on 31 March 2030. Homeowners who delay risk losing the saving. The message from Lewis is clear: book a survey now, compare quotes from three registered installers, and apply for the Boiler Upgrade Grant before the scheme’s budget runs out.

Households on standard variable tariffs can check eligibility through the Energy Saving Trust’s website from today. The VAT change alone won’t fix the energy crisis, but combined with other grants, it makes the maths of going green a lot easier.