What Is the VAT Rate on Heat Pumps in the UK?
Air source heat pumps (ASHP) qualify for 0% VAT in the UK. This rate has applied since 1 April 2022 under the Finance Act 2022, which introduced a temporary zero-rate for energy-saving materials and their installation. On a typical ASHP installation costing £11,000, the 0% rate saves approximately £1,833 compared to the standard 20% rate. The zero rate applies to both the supply of the equipment and its installation when contracted together.
This is one of two significant financial benefits available for heat pump installations in 2026 — the other being the £7,500 Boiler Upgrade Scheme (BUS) grant (subject to eligibility). Unlike the BUS grant, the 0% VAT rate requires no application and applies automatically on every qualifying installation.
What Does the 0% VAT Rate Cover?
HMRC’s guidance (Notice 708/6) defines energy-saving materials (ESMs) qualifying for the zero rate. For heat pump installations, the following are covered at 0% VAT when supplied and installed together:
- Air source heat pump unit (the outdoor and indoor units)
- Hot water cylinder (when supplied as part of the heat pump system)
- Buffer tanks and thermal stores
- Controls and thermostats supplied as part of the installation
- Pipework and fittings forming part of the heating system
- Labour and installation costs — the full installation contract is zero-rated when the primary supply is qualifying ESM
The key principle is that the installation must be a single supply — where the primary purpose is the supply and installation of the energy-saving materials. HMRC considers the entire contract zero-rated if the ESM element is predominant.
What Is Excluded from 0% VAT?
Not everything connected to a heat pump project qualifies for the zero rate:
- Standalone repairs or servicing of existing equipment (standard 20% VAT applies)
- Radiator upgrades (if quoted as a separate contract, they may attract standard VAT — though if included as part of the heat pump installation contract, they may be covered)
- Scaffolding-only contracts charged separately by a third party
- General building works such as chasing walls, plastering after installation
- Electrical consumer unit upgrades if invoiced separately from the heat pump installation
The practical implication: ensure your installer provides a single combined contract for the heat pump and all directly related components. Do not accept separate invoices for the unit and the installation if you wish to ensure the 0% rate applies to the full amount.
How Much Does 0% VAT Save?
The saving is substantial. The table below illustrates the VAT impact across a range of typical ASHP installation costs.
| Installation Value (ex. VAT) | At 20% VAT | At 0% VAT | Saving |
|---|---|---|---|
| £8,000 | £9,600 | £8,000 | £1,600 |
| £10,000 | £12,000 | £10,000 | £2,000 |
| £11,000 | £13,200 | £11,000 | £2,200 |
| £12,500 | £15,000 | £12,500 | £2,500 |
| £14,000 | £16,800 | £14,000 | £2,800 |
For a typical standalone ASHP installation at £11,000 (the UK average before the BUS grant), the 0% VAT rate saves £1,833 (20% of £9,167 is a less useful way to think about it — simply: the cost without VAT is exactly what you pay). Using £11,000 as the total ex-VAT contract price, 20% VAT would add £2,200, giving a total of £13,200 — whereas at 0% you pay £11,000. The saving is therefore £2,200 on an £11,000 contract.
Note: Figures above use the ex-VAT contract price as the base for 20% VAT calculation.
How the 0% VAT and BUS Grant Work Together
The 0% VAT rate and the £7,500 BUS Grant are entirely separate schemes and can both be claimed on the same installation. They are not mutually exclusive — you stack the benefits.
Here is how a typical ASHP installation looks with both benefits applied:
| Amount | |
|---|---|
| Gross installation cost (equipment + labour) | £12,500 |
| VAT at 0% | £0 |
| You pay (pre-grant) | £12,500 |
| BUS Grant (subject to eligibility) | −£7,500 |
| Your net cost | £5,000 |
Without either benefit, the same installation at 20% VAT would cost £15,000 before any grant. The combined effect of 0% VAT and the BUS grant reduces the homeowner’s cost by £10,000 on a £12,500 installation — a saving of 67%.
To understand full BUS Grant eligibility and how to apply, read our complete guide to the BUS Grant and how to claim £7,500. With electricity at 24.5p/kWh (Ofgem April 2026 price cap) and gas at 7.4p/kWh, a heat pump with a COP of 3.0 delivers heat at an effective cost of 8.2p/kWh — marginally above gas, but with zero carbon emissions and the benefit of the grant and tariff savings stacked on top.
How to Verify the VAT Rate on Your Invoice
When you receive an invoice for heat pump installation, check the following:
- VAT rate shown: It should state 0% VAT or “Zero-rated supply — Energy Saving Materials (Finance Act 2022)”
- Single contract: The invoice should cover supply and installation together, not split into separate supply and installation invoices with different VAT rates
- VAT number: Your installer must be VAT-registered. Check their VAT registration number on the HMRC online checker
- Description: The invoice should describe the goods as an energy-saving material (e.g. “Air Source Heat Pump — Samsung 8kW Mono HT Quiet”)
If your installer charges you 20% VAT on a new heat pump installation, challenge this and ask them to clarify their reasoning. You should not be paying 20% VAT on a straightforward new ASHP installation.
Will the 0% VAT Rate Continue?
The Finance Act 2022 initially applied the zero rate as a five-year measure until 31 March 2027, after which it was due to revert to 5%. However, subsequent government statements have indicated support for extending the zero rate beyond 2027. At the time of writing (April 2026), the 0% rate remains in force. Check HMRC guidance for any updates if you are planning an installation after March 2027.
Heat Pump VAT for Landlords and Commercial Properties
The 0% VAT rate for heat pumps applies specifically to dwellings — residential properties used as private homes. For landlords installing heat pumps in residential rental properties, the 0% rate should also apply, as the installation is in a qualifying dwelling regardless of ownership.
For commercial properties (offices, retail, industrial), standard VAT rules apply — the heat pump supply and installation would attract 20% VAT, though VAT-registered businesses can usually reclaim this. Speak to a VAT adviser if you are installing heat pumps in mixed-use or commercial properties.
Local Context: Heat Pump VAT in London and Surrey
For homeowners in the TW postcode area — Hampton, Twickenham, Richmond, Kingston, and Sunbury-on-Thames — the 0% VAT rate applies on any qualifying ASHP installation just as it does across the rest of England, Wales, and Scotland. There are no regional variations to the VAT rules.
One practical point for London homeowners: some properties in conservation areas or with listed building status may require additional works (specialist casings, longer refrigerant line-sets, non-standard mounting) that could be invoiced separately and therefore attract standard VAT. Always request a single combined quote from your installer to avoid this.
For a full picture of heat pump costs and savings in this area, see our guide to how much a heat pump costs in the UK in 2026 and our comparison of heat pump running costs vs a gas boiler.
How Electromatic Can Help
Electromatic M&E Ltd installs air source heat pumps across the London and Surrey TW area. All our installation quotes are provided as single combined contracts, ensuring the 0% VAT rate applies to the full supply and installation. We work under MCS certification via our accredited umbrella partner, which is required for BUS Grant eligibility. We handle the BUS Grant application on your behalf, so you benefit from both the 0% VAT and the grant without having to navigate government paperwork yourself.
Call us: 07718 059 284 | Email: admin@electromatic.uk
Frequently Asked Questions
What VAT rate applies to heat pump installation in the UK?
Air source heat pump installation qualifies for 0% VAT in the UK since 1 April 2022 under the Finance Act 2022. Both the equipment and the installation labour are zero-rated when contracted together as a single supply of energy-saving materials.
Does 0% VAT apply to the hot water cylinder as well as the heat pump?
Yes. A hot water cylinder (unvented or vented) supplied and installed as part of the heat pump system qualifies for 0% VAT. It is considered part of the energy-saving materials supply when included in the same installation contract.
Can I get both the 0% VAT and the BUS Grant on a heat pump?
Yes. The 0% VAT rate and the £7,500 BUS Grant (subject to eligibility) are entirely separate benefits and can both apply to the same installation. On a typical £12,500 ASHP installation, combining both reduces your cost to approximately £5,000.
My installer charged me 20% VAT on a heat pump — is this correct?
Almost certainly not for a new residential ASHP installation. The 0% VAT rate has applied since 1 April 2022. Ask your installer to provide the legal basis for charging 20% VAT. If they cannot justify it, raise a formal query and consider reporting the issue to HMRC.
Does the 0% VAT rate apply to heat pump maintenance and servicing?
No. Standalone maintenance, servicing, or repairs of existing heat pumps attract standard VAT rates (20%). The zero rate applies only to the supply and installation of new energy-saving equipment.
The information in this article is for general guidance only and does not constitute financial, legal, or technical advice. Energy savings estimates are based on typical UK household data from the Energy Saving Trust and Ofgem (April 2026 price cap). Actual savings depend on your property type, insulation levels, energy usage patterns, and electricity tariff. The Boiler Upgrade Scheme (BUS) grant of £7,500 is subject to eligibility criteria set by Ofgem — not all properties qualify. Electromatic M&E Ltd operates under MCS certification via an accredited umbrella partner. All installations comply with Building Regulations Part L and MCS standards. E&OE.
Last updated: April 2026 | Electromatic M&E Ltd, Company No. 13837345
Written by Electromatic M&E Ltd — ASHP & Solar installer, London & Surrey (electromatic.uk)
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