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HomeBusinessSunak's VAT cut on solar panels won't help cost of living crisis

Sunak's VAT cut on solar panels won't help cost of living crisis


Chancellor’s VAT cut worth £1,000 on solar panels is dismissed as doing ‘little to help’ the cost of living crisis as installing them costs almost £5,000

  • The Chancellor said he would remove VAT on some energy efficient measures 
  • The cut applies to the installation of solar panels, heat pumps and insulation
  • Mr Sunak says cut saves £1k on installation and £300 annually on energy bills

The scrapping of VAT on the installation of solar panels has been dismissed by financial experts as doing ‘little to help’ struggling households.

The Chancellor Rishi Sunak said in the Spring Statement that he would remove VAT on energy efficient measures such as solar panels, heat pumps and insulation installed for five years.

But financial experts said the move would do little to help people with the ‘immense financial burden associated with making their homes green’.

The Chancellor said in the Spring Statement that he would remove VAT on some energy efficient measures

The Chancellor said in the Spring Statement that he would remove VAT on some energy efficient measures

In particular, solar panels typically cost around £4,800 to install, which is a large initial outlay for cash-strapped households dealing with the cost of living crisis.

It would remain the case for many households even once the Chancellor’s VAT cut is taken into account. 

Mr Sunak claimed that the VAT cut would save £1,000 on installation and then £300 annually on their energy bills. 

At that rate it would take someone more than 12 years to break even on the energy saving benefit.

And no matter how environmentally friendly they are, or how much money solar panels can potentially save householders over the longer term, there is still thousands of pounds to pay out to even get started. 

This may simply be too big a hurdle for many householders with more immediate financial pressures to consider.

Jason Mountford, a financial panning expert at Irwin Mitchell, said: ‘Sunak announced that this would save homeowners £1,000 on average. But given that the average cost to install home solar panels is £4,800, it is another measure that is unlikely to impact the hardest hit by the energy crisis.’

And Elise Coole, of specialist buy-to-let lender Keystone Property Finance, described the measure as a ‘step in the right direction’, but added that the Government should be doing much more to help ‘people shoulder the immense financial burden associated with making their homes greener’.

She explained: ‘The Chancellor claims his plan will save the average person installing solar roof panels more than £1,000. But is that really much of an incentive when the average cost of installing solar panels is around £4,800?’

Mr Sunak said scrapping VAT on the installation of solar panels would saves £1,000 on installation and £300 annually on energy bills

Mr Sunak said scrapping VAT on the installation of solar panels would saves £1,000 on installation and £300 annually on energy bills

She went on to call for the Government to introduce more support, including a replacement for the former Green Homes Grant.

‘If the Government is serious about nudging people into action it needs to provide more direct financial support, such as expanding the Boiler Upgrade Scheme so more people can take advantage of it.

‘Ideally, this would be alongside the introduction of a replacement for the now defunct Green Homes Grant, which provided grants of up to £5,000 to those making energy saving improvements. If given the time and proper funding, this scheme could have flourished and become a real game changer.’

Julie Hirigoyen, of the UK Green Building Council (UKGBC), said: ‘Helping households cut energy waste and switching to clean energy is the best way to lower their energy bills.

‘But with gas prices set to soar again in the Autumn, much more Government support is urgently needed to kick start a nationwide systematic long-term programme of home upgrades.’

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