VAT Returns 2027: Impact

What happens when solar VAT returns in 2027?

The 0% VAT rate on domestic solar installations was introduced in the Finance Act 2022 and is currently set to end March 2027. Three scenarios: SCENARIO 1 — VAT EXTENDED AT 0% (best case): No impact. Government may extend due to net zero commitments. Probability: 40-50%. SCENARIO 2 — VAT RETURNS TO 5% (likely): A 4kW system at £7,000 net → £7,350. Extra cost: £350. Impact on payback: +3-5 months. Probability: 30-40%. SCENARIO 3 — VAT RETURNS TO 20% (worst case): £7,000 net → £8,400. Extra cost: £1,400. Impact on payback: +1.5-2 years. Probability: 10-20%. RUSH EFFECT: Before any deadline, demand surges 30-50% (we saw this with FIT closure in 2019). This causes: wait times increase to 8-16 weeks, prices rise 5-10% due to demand. RECOMMENDATION: Install by December 2026 to guarantee 0% VAT AND avoid the rush. Order by October 2026 to guarantee pre-deadline installation. Sources: Finance Act 2022 Section 7 (legislation.gov.uk), HMRC VAT Notice 708/6 (gov.uk), solar industry demand data from 2019 FIT closure.