The UK will start charging VAT on home solar and battery storage, ending the zero rate that has applied to these systems. From 1 April 2027, the rate rises to 5%, according to the Budget presented by Chancellor John Healey on 28 October.
The Budget also adds GBP 100 million for solar and battery installations on social housing and opens a consultation on fixed-price contracts for older solar farms. Solar Energy UK welcomed much of the package, but warned that the VAT change sends the wrong signal.
VAT returns to home solar
Home solar and battery storage currently carry no VAT. That changes on 1 April 2027, when a 5% rate will apply, pv magazine reported.
"Removing the VAT exemption is inconsistent with the Government's intention for more people to enjoy the benefits of home solar and battery systems," said Chris Hewett, chief executive of Solar Energy UK.
He pointed out that domestic electricity bills are zero-rated until July next year, so "saving energy will be taxed more heavily than consuming it – a perverse incentive." The association said it will urge the government to reverse course.
Money for social housing and cheaper loans
Social housing tenants will receive an extra GBP 100 million, subject to final approvals, to support up to 57,000 solar installations this financial year.
The government is also backing Warm Home Loans. It subsidises part of the lenders' financing risk so that they can offer lower interest rates, and solar, battery storage and heat pumps qualify. The loans can be combined with grants.
The Warm Homes Plan gets an extra GBP 335 million in 2027, but its multi-year budget is cut by GBP 1 billion as a contribution to defence spending. The Boiler Upgrade Scheme survives, with grants of up to GBP 9,000, but its total budget is reduced by about GBP 700 million.
"These and many aspects of the Budget are most welcome," Hewett said, adding that "it is clear that the Chancellor understands how solar and battery storage is contributing to delivering cheaper power."
Older solar farms and the CfD round
The government has opened a consultation on Wholesale Contracts for Difference, a programme that would offer fixed revenues to existing utility-scale solar plants. According to Solar Energy UK, early solar farms supported by Renewable Obligation Certificates will be able to move to the fixed-price scheme, which brings an exemption from the Energy Generator Levy. Responses are due by 9 December 2026.
Solar Energy UK is also seeking clarity on the eighth Contracts for Difference allocation round, which the Chancellor's statement suggests will only be open to projects that can connect to the grid and start generating as early as possible.
"The devil will be in the detail of this scheme," said Gemma Grimes, director of policy and delivery at Solar Energy UK.
Elsewhere, Great British Energy's funding over the spending review period falls by GBP 200 million to GBP 8.3 billion, while the Energy Wealth Fund receives GBP 2 billion.
What it means for European developers
For residential installers, the 5% VAT rate from April 2027 is likely to bring demand forward into the coming months, while the GBP 100 million social housing fund and subsidised loans support volumes at the lower-income end of the market. For owners of older utility-scale plants, the Wholesale CfD consultation could offer a route to fixed revenues as their subsidy support ends, and developers of new projects will be watching how the eighth CfD round is limited to projects that can connect quickly.
Source: Solar Energy UK, 28 October 2026; pv magazine, 29 October 2026
