Tax benefits for energy-efficient building materials

As the world grapples with environmental challenges, more self-builders are leaning towards sustainable practices - some even aiming to achieve passive house standards for their projects. In an essential step towards reducing carbon emissions and conserving resources, the UK government has introduced tax benefits to encourage greener construction methods. 

Here, we explore the key concepts, eligibility criteria, and documentation requirements for claiming tax benefits related to energy-efficient building materials.

Energy-efficient building materials are products that contribute to reducing energy consumption and promoting sustainability. They typically possess better insulating properties, reduce heat loss or gain, and may incorporate renewable resources or recycled content.

Products and materials covered under this scheme include:

- Controls for central heating and hot water systems

- Draught stripping (e.g. on doors and windows)

- Insulation

- Solar panels

- Ground source heat pumps

- Air source heat pumps

- Micro combined heat and power units

- Wood-fuelled boilers

- Wind turbines

- Water turbines

Self-build shows can be a great place to find suppliers of energy-efficient building materials, and all Deuren doors are engineered to passive house standards, minimising heat loss and providing super insulation.

To qualify for the zero-rated VAT, both the product and its installation must be undertaken together. To put it simply, if you were to buy the product or materials from a merchant and undertake the work yourself, this wouldn’t qualify and would be subject to the standard tax rate. The installation of the specified products is eligible for the 0% rate until 31 March 2027. Beyond this, the installation of these products will revert to a reduced 5% VAT rate.

If work is undertaken to facilitate the installation of energy efficiency materials, such as fitting a new loft hatch for roof access or installing new radiators with a heat pump, this is also included in the coverage.

The majority of the work must revolve around the installation of the listed products. For example, if a customer has insulation fitted and a completely new roof put on, the usual rate of tax would apply. Building an extension with energy efficiency materials would also not be zero rated, as the installation of the products isn’t the sole purpose of the work.

To avail tax benefits, proper documentation is crucial. It’s good practice to keep track of the following:

• Receipts and invoices: Keep detailed receipts and invoices for the purchase and installation of energy-efficient building materials. Ensure they include product specifications and costs.
• Certifications and labels: Retain copies of certifications and labels that establish the energy efficiency of the purchased materials.
• Energy audit reports: For existing buildings, an energy audit report may be necessary to demonstrate the improvements made and the resulting energy savings.
• Contractor information: Maintain records of the contractors involved in the construction or renovation, along with their credentials and certifications.

Embracing energy-efficient building materials is not only a financially wise choice but also a step towards creating a greener and more sustainable world. Need more advice on self-build projects? Break down the journey step-by-step, or explore our self-build resources.