0% VAT on Domestic Air Conditioning Installation Since 2022
During the Spring Statement in 2022, Rishi Sunak as Chancellor of the Exchequer (at the time) announced a 0% VAT introduction for domestic air conditioning installations.
The new cut in VAT is taking the place of the old scheme that lowered the rate from 20% to 5%. The goal here is to get more people to consider fitting their homes with air conditioning units. The government’s pushing for this to help lessen household carbon footprints and ease the ongoing energy cost issues.
Mr Sunak confirmed that guidance on tackling the current heating costs has been included in the recently released “Energy Security Plan”, which took effect in March 2023. The plan is going to set out the steps and the funding needed to make energy more affordable here in the UK.
For more insights, you can check out the 0% VAT on energy-saving installations and grant-backed heating equipment on the government’s website.
An Opportune Time for Domestic Air Conditioning Installation
The inclusion of air conditioning installation within the scheme is noteworthy. Rishi Sunak announced, “Homeowners opting for solar panels, heat pumps, and insulation will now be subject to a zero per cent VAT, as opposed to the previous 5%.” Although Mr. Sunak did not explicitly mention air conditioning units, they can be categorised alongside heat pumps due to their dual functionality, which enables the provision of both hot and cold air to a residence.
Given that air conditioning units are encompassed in the 0% VAT initiative, now is an opportune time to consider the installation of a domestic air conditioning system. Furthermore, because the scheme accommodates units capable of delivering both cold and hot air, the potential cost savings in comparison to air source heat pumps could render them an economically efficient solution for maintaining optimal household temperatures.
How does this enhance the value of the Air Source Heat Pump Grant?
In April, the government rolled out a new grant for Air Source Heat Pumps, making households in England and Wales eligible for a £5,000 subsidy towards installation costs. This initiative is part of a broader £3.9 billion funding package, with £450 million earmarked over the next three years to support the installation of 90,000 Air Source Heat Pumps, aiding the UK’s aim for net-zero emissions by 2050.
Additionally, the decision to cut VAT to 0% on Air Source Heat Pump installations has been warmly received. The Heat Pump Association (HPA) expressed its approval, noting the removal of the existing 5% VAT as a positive step towards encouraging energy-efficient solutions like heat pumps. Together, these financial incentives are expected to boost the number of heat pump installations across UK homes.