10 energy saving technologies you can install at 5% VAT

By Katie Anderson on September 17th, 2013

10 energy saving technologies you can install at 5% VAT

If you install certain energy saving technologies you’ll be able to reduce your household energy bills. And better still a number of energy saving technologies can be installed at just 5% VAT. 

If you own a residential property and you’re considering implementing energy saving measures now is the time to act whilst you can still benefit from 5% VAT.

So exactly which materials and what technologies qualify for a lower rate of VAT, and who is able to benefit from the reduced rate?

Thanks to energy bills rising at an unprecedented rate, more and more people are seeking out ways to cut these costs, whether it’s by reducing the amount of energy they are consuming or implementing measures to make homes more energy efficient through home insulation or installing renewable technologies to generate electricity and heat.

The lower VAT rate applies to microgeneration technologies which generate zero, low and renewable energy at a ‘micro scale’, whether generating electricity through solar PV, micro wind turbines, micro-hydro and micro-CHP or micro-heat with heat pumps, biomass and solar thermal. DIY installations however are not included.

What qualifies for 5% VAT?

  • Insulation – home insulation for walls, floors, lofts and ceilings. Installing loft and cavity wall insulation is a cost-effective way to lower energy bills. The better insulated your home the less heat will be allowed to escape, so your home will feel more comfortable and stay warmer longer.
  • Draught insulation – some homes are particularly susceptible to drafts and certain areas such as doors and windows are the biggest culprits. By draught proofing doors and windows and even loft hatches and letterboxes it will help to prevent heat escaping unnecessarily.
  • Solar PV panels – installing solar photovoltaic panels – also known as solar PV – will enable you to generate your own renewable electricity. Aside from  saving money on your energy bills, you’ll also be paid for generating your own electricity, thanks to the Government’s feed-in tariff scheme.
  • Solar thermal – while solar PV panels generate electricity for the home, solar thermal hot water systems are used in conjunction with conventional boilers or immersion heaters to provide heat and hot water. Most modern boiler systems are compatible.
  • Micro wind turbines – a renewable source of generating electricity by harnessing the power of the wind, micro or small-scale wind turbines are installed on domestic properties and help home owners to reduce their electricity costs. Domestic wind turbines can either be pole mounted or mounted on a building.
  • Ground source heat pumps – how much money you will be able to save by installing a heat pump will very much depend on the system you are using to distribute heat. Underfloor heating and large radiators perform better than your standard radiator based heating system. The energy efficiency of  the heat pump will impact on fuel costs.
  • Air source heat pumps – like ground source heat pumps, air source heat pumps are a complete solution to all your heating and domestic hot water needs and can help you to lower your energy costs. Air-to-water and air-to-air are the two main types of air source heat pumps.
  • Micro combined heat and power (CHP) units – micro CHP systems resemble a conventional gas central heating boiler, and they work in a very similar way. With a micro CHP system the same energy source generates heat and electricity at the same time. This low carbon technology is particularly ideal for homes with large heat demands that are unable to benefit from home insulation, such as draught proofing.
  • Biomass heating systems – while biomass boilers qualify for 5% VAT wood burning stoves do not.
  • Central heating and hot water system controls

At this moment in time energy efficient boilers and secondary or double glazing qualifies for the standard VAT rate of 20%.

Who qualifies for the lower rate of VAT?

Largely aimed at domestic installations, however currently the 5% VAT rate applies also applies to the following:

  • Certain charities
  • Armed forces residential accommodation
  • Care homes for the elderly
  • Hospices
  • School and university residential accommodation
  • Children’s homes

Equipment, materials and installation costs should all be charged at the lower rate. However if the materials and the equipment are fitted into a new build property during construction the VAT is exempt. Should any additional work be required as a result of the installation then that too will qualify for lower VAT. Although this is not the case if you’re having the materials installed as part of a larger project, for example a new extension, a new roof or if a new central heating system is being installed.

Energy saving grants and 5% VAT

It’s worth checking to see whether you can benefit from some sort of home insulation subsidy, particularly in the case of loft and cavity wall insulation.  Depending on age and circumstances (if you’re on certain benefits) you might actually be able to get your cavity walls and loft space insulated and not incur any costs.

Being on certain types of benefits will also enable you to qualify for a lower installation rate on heat appliances such as boilers, radiators and immersion heaters. And if you’re 60 or older you’ll also get a lower rate if you’re installing, maintaining and repairing a central heating system.

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