The UK slashed value-added tax (VAT) to zero for folks installing battery storage in their homes from February 1, 2024.

UK battery storage cost drops 20%

This is a big deal because VAT is 20% in the UK, so this makes battery storage much more wallet-friendly. Buildings used solely for charitable purposes also qualify for the tax-free battery storage benefit. (Rooftop solar is already VAT-free.)

Previously, domestic battery storage was only VAT-free if combined with solar. From yesterday, the VAT-free rate will also apply to retrofitted residential battery storage, meaning that more than 1.2 million homes with rooftop solar can now benefit from the tax cut.

The law also extends the same VAT exemption to water-source heat pumps and smart diverters that transfer solar power into hot water tanks when generation exceeds consumption.

Chris Hewett, chief executive of solar and battery storage trade association Solar Energy UK, said, “The cut in VAT is exceedingly welcome and we have every expectation that it will increase demand for home battery energy storage. Allowing solar power to be used after dark can double the savings offered by home solar power systems. There has never been a better time to upgrade than today.”

The zero VAT rate on the installation of energy-saving materials, including solar panels, is set to last until March 31, 2027.​ This tax break is part of the UK’s plan to reach the Paris Agreement goal of net zero by 2050.

Electrek’s Take

If you’re unfamiliar with how goods and services are taxed in the UK, here’s how it works: Something that costs £100 is actually £80 plus £20 tax, because the tax is already included in the gross cost, unlike the US, for example, which adds it to the price at checkout.

UK folks purchasing solar and storage will get 20% off upfront. It’s less than the 30% tax credit Americans get, but the US tax credit must be filed with the IRS after installing solar and storage.

Read more: The world’s largest EV battery maker will build its own $1.83B offshore wind farm

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