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Homeowner Blog

How to Get 5% VAT on Solar Panels

George Riley 04 Oct 2019

Another week and another upheaval in the world of solar… While the world wakes up to the imminent threat of climate breakdown, our trusty government has decided it’s the perfect time to hike the VAT on solar PV installations.

We saw a rush in September for last minute bookings at the lower rate, but is it still possible to get 5% VAT on solar panels? And how will our quotes be affected by the new ruling?

The solar VAT rise

As of October 1st 2019, the VAT charged on many solar installations has risen from 5% to 20%. Speculation is that this change is to bring the UK in line with EU directives on energy saving materials.

On the positive side, there are some exemptions in the new rule. You will still pay 5% VAT if:

  • The cost of materials is less than 60% of the total installation cost.
  • You are over 60.
  • You receive certain benefits.
  • Your building is a housing association, care home, children’s home or hall of residence.

These rules apply to batteries when they are installed along with solar PV (ie both are included in the 60% materials cost condition). When batteries are retrofitted, the VAT will remain at 20% regardless.

Just to make it even more complex, the 5 or 20% VAT applies to the materials part of the installation cost, while the labour part will remain at 5% VAT.

When can you pay 5% VAT on solar?

If you’re over 60 (or receiving the benefits/living in a building mentioned above), great! You qualify for 5% VAT on solar installations.

Otherwise, let’s take a look at a worked example to be eligible for the lower rate on your project.

Sample standard 4.2kWp system spec:

  • 14 x JA 300W 'all-black' monocrystalline panels
  • Concrete tile 'on roof' mounting system
  • Solis 3.6kW inverter
  • Standard structural assessment and scaffolding
  • Standard 1 day install 

This would have an average product cost of £2,458 + VAT and a non-materials cost of £2,953 + VAT. Since the product cost is 45% of the total price, it qualifies for 5% VAT. So you would pay £5,682 including VAT.

SunPower Res 3

The impact for high end technology

Many of our customers choose the top end components for their solar system, like high efficiency SunPower panels or the optimised SolarEdge inverter. But how does this affect the VAT rate?

Sample higher end 5.46kWp system spec:

  • 14 x SunPower 390W high efficiency panels
  • Concrete tile 'on roof' mounting system
  • Solis 5kW inverter
  • Standard structural assessment and scaffolding
  • Standard 1 day install 

This would have an average product cost of £5,176 + VAT and a non-materials cost of £3,068 + VAT. Since the product cost is 63% of the total price, it falls into the 20% VAT bracket. So you would pay £9,432 including VAT. However...

If we increase the non-materials cost by £400, this would make the product cost 59.9% of the total price, so it now qualifies for 5% VAT. You would pay £9,076 including VAT, a saving of £356!

Expect to see more of this kind of ingenious pricing in the new solar era.

The best quote

At Spirit we have always been committed to giving you the most appropriate and cost-effective quote for your project - and we will continue to do so.

When you get in touch, we’ll discuss which components are right for you and be transparent about how this will impact the VAT rates and overall project cost, so you can make an educated decision.

Give us a call on 0118 951 4490 or hit the button below for more advice.

Request free advice / quote 

Topics: Solar PV

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