UK government announces tax relief on battery storage systems

Expanding the scope of the relief – electrical battery storage

  • Electrical battery storage
  • Water-source heat pumps
  • Diverters retrofitted to ESMs such as solar panels and wind turbines

Which type of battery storage projects are included?

All of these reforms will apply across the whole of the United Kingdom as a result of the Windsor Framework. These reforms will also be permanent, meaning that, when the zero rate aspect of this relief sunsets on 31 March 2027, the installation of all technologies in scope of this relief will revert to the reduced rate of VAT at 5%.

The government remains committed to its longer-term objective to improve the energy efficiency of the UK’s housing stock, and ultimately, reach net zero greenhouse gas emissions by 2050. While the government recognises the key role that this relief plays in helping to achieve these objectives, it would not be fiscally prudent to take the decision to extend this zero rate beyond 31 March 2027 at this stage. However, the government retains its discretion to extend this zero rate ahead of its 2027 sunset date, at a time when the government will have richer data on the impact of this VAT relief and a clearer sense of the post-2027 fiscal picture.

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