Do businesses pay VAT on solar panels?
Yes, as a rule. The standard rate of VAT is 20% (GOV.UK), and it applies to supplying and installing solar panels on business premises. HMRC's relief for energy-saving materials, which lists "photovoltaic (PV) panels with cabling, control panel and AC/DC inverter" among the qualifying materials, only covers installations in residential accommodation and, since 1 February 2024, buildings intended for use solely for a relevant charitable purpose (Notice 708/6, 2.7 and 2.11).
For most businesses that is less of a cost than it sounds: a VAT-registered business can normally reclaim VAT on what it buys for its taxable business, which is why installers usually quote business customers excluding VAT (GOV.UK).
Where the zero rate applies and where it doesn't
HMRC's Notice 708/6 lists what counts as residential accommodation for the relief, and names the buildings that stay standard-rated (Notice 708/6, 2.21). Several are businesses:
VAT on installing solar panels, by type of building, from HMRC Notice 708/6 (checked 2 November 2026)
| Building | VAT on supply and installation |
|---|---|
| Factories, offices, shops, warehouses, workshops, farm buildings | Standard rate, 20% |
| Hotels, inns and similar establishments | Standard rate, 20% |
| Hospitals and prisons | Standard rate, 20% |
| Homes providing care for the elderly or disabled, children's homes, hospices | Zero rate until 31 March 2027, then 5% |
| Self-catering holiday accommodation | Zero rate until 31 March 2027, then 5% |
| Student and pupil residential accommodation | Zero rate until 31 March 2027, then 5% |
| Buildings used solely for a relevant charitable purpose (since 1 February 2024) | Zero rate until 31 March 2027, then 5% |
HMRC says the zero rate runs from 1 May 2023 to 31 March 2027, and that from 1 April 2027 these installations revert to the reduced rate of 5%. In Northern Ireland the zero rate has applied since 1 May 2023; in Great Britain since 1 April 2022 (Notice 708/6).
So a holiday park with self-catering lodges, a care home or a boarding school's residential block may pay no VAT on solar there, while the same owner pays the standard rate on panels for a restaurant, reception or teaching block. See our pages for hotels and hospitality and schools.
Charities and mixed-use buildings
Since 1 February 2024 the relief covers buildings intended for use solely for a relevant charitable purpose. HMRC defines that as use by a charity "otherwise than in the course or furtherance of a business", or "as a village hall or similarly in providing social or recreational facilities for a local community". The installer should take reasonable steps to check the use, for example with a letter from you confirming it; no certificate is needed (Notice 708/6, 2.22). More on what counts is in section 14 of HMRC's buildings and construction notice (Notice 708).
"Solely" matters. A charity shop, a café run as a business, or a building hired out commercially is unlikely to meet it. Where a single job covers buildings with different VAT treatment, HMRC says a fair and reasonable apportionment of the charge has to be made (Notice 708/6). Ask the installer to price each building separately.
Reclaiming the VAT
- VAT-registered, fully taxable: The business can normally reclaim the VAT on the panels as input tax, so the VAT is a cash flow cost, not a final cost
- Partly exempt: A business that makes exempt supplies (some financial services, some property letting, some education and health) may only recover part of the VAT
- Not VAT-registered: The VAT is a real cost. Compare prices including VAT
- Mixed business and private use: Only the business share is reclaimable
Your accountant will confirm the position for your business. The VAT treatment is separate from capital allowances, which are claimed on the cost of the system for income or corporation tax, and from business rates.
Batteries
Since 1 February 2024 HMRC has included electrical storage batteries in the relief, whether retrofitted to an existing solar system, installed with one, or standalone and charged from the grid, but only in residential accommodation or a building used solely for a relevant charitable purpose (Notice 708/6, 2.19). A battery for business premises is standard-rated like the panels. Our guide to commercial battery storage covers when one is worth adding.
Note: General information from HMRC's published guidance, not tax advice. Your accountant decides how VAT applies to your business.
Sources
HMRC VAT Notices 708/6 and 708 and the GOV.UK VAT pages were read on 2 November 2026. VAT rules change at Budgets, so check the notice before relying on it.
Frequently asked questions
Do businesses pay VAT on solar panels?
Usually yes, at the standard rate of 20%. HMRC's zero rate for energy-saving materials only applies to installations in residential accommodation and, since 1 February 2024, in buildings used solely for a relevant charitable purpose. Panels on a factory, office, shop, warehouse, farm building or hotel are standard-rated.
Can a VAT-registered business reclaim the VAT on solar panels?
Generally, a VAT-registered business can reclaim VAT on purchases it uses for its taxable business activities, so the standard-rated VAT on panels for its own premises is normally recoverable. A business that makes exempt supplies, or uses the building partly for non-business purposes, may only recover part of it. Check with your accountant.
Is solar zero-rated for a care home?
HMRC's list of residential accommodation for the energy-saving materials relief includes homes providing care for the elderly or disabled, children's homes and hospices. Installations there can be zero-rated until 31 March 2027, when the reduced rate of 5% returns. Hospitals are standard-rated.
Is solar zero-rated for self-catering holiday lets?
HMRC's Notice 708/6 lists self-catering holiday accommodation as residential accommodation for this relief, so installing solar panels in it can be zero-rated until 31 March 2027. Hotels, inns and similar establishments are listed as standard-rated.
Do charities pay VAT on solar panels?
Not if the building is used solely for a relevant charitable purpose: since 1 February 2024 those installations qualify for the zero rate until 31 March 2027. HMRC defines that as use by a charity otherwise than in the course or furtherance of a business, or as a village hall or similar providing social or recreational facilities for a local community. A charity using a building for business activities pays the standard rate.
Is VAT charged on a commercial battery?
At the standard rate for a commercial building. Since 1 February 2024 HMRC has included batteries in the zero rate, but only when installed in residential accommodation or a building used solely for a relevant charitable purpose.
What happens to the zero rate after March 2027?
HMRC says that from 1 April 2027, installations of energy-saving materials in residential accommodation and charitable buildings revert to the reduced rate of 5%. Business premises are standard-rated either way.
Related pages
Capital allowancesHow solar panels are treated for capital allowances: the special rate pool, the Annual Investment Allowance, the 50% first year allowance for companies, and illustrative examples.- Charities and communityCharity buildings range from daily offices to occasional-use halls and historic churches. The survey tests whether demand matches generation and highlights VAT, heritage and governance points.
Commercial solar costIllustrative prices per kWp by system size, extra costs, running costs, VAT and tax.
Power purchase agreementsHow on-site solar PPAs work, typical contract lengths, how prices rise over time, what happens if you sell or move, and the clauses to check before signing.