The Chancellor has announced in his Spring Statement 2022 that Landlords who will need to upgrade their properties to a C efficiency rating by 2028 will be able to take advantage of zero-rate VAT for the installation of materials improving a property's energy efficiency from April 2022. 

Since April 2020 all domestic private rented properties in England and Wales have been required to have a minimum Energy Performance Certificate (EPC) rating of E. Landlords are currently required to spend a maximum of £3,500 on upgrades to achieve an E rating. If an EPC band E rating can't be reached within that limit, then landlords can obtain an exemption.

This is likely to change however, and the government have recently announced that they intend to raise this minimum rating to a C rating. Under these new proposals, the government is also proposing to increase the upgrade spend cap to £10,000.

Landlords need to consider what upgrades may be necessary for their properties to obtain the required ratings and act now to take advantage of the relevant government support, including this VAT cut on the installation of energy efficient materials.

Homeowners installing certain energy saving materials (ESMs) in Great Britain will be eligible for the new zero-rate VAT. These materials include:

  • Controls for central heating and hot water systems
  • Draught stripping
  • Insulation
  • Solar panels
  • Ground and air source heat pumps
  • Micro combined heat and power units
  • Wood-fuelled boilers

Wind and water turbines have also been re-added to the list as qualifying technologies.

The government has confirmed that the reduced rate will be in place from April 2022 for a period of 5 years, when it will then revert to the previous 5% VAT rate.