Since 1 April 2022, HMRC has applied a 0% rate of VAT to the supply and installation of qualifying energy-saving materials in residential accommodation across Great Britain. It's a genuinely significant saving — the standard rate it replaces is 20% — and it's one of the least-known incentives available to homeowners right now.
Why air conditioning qualifies as an "energy-saving material"
It sounds like an odd fit at first. The relief was designed around insulation, solar panels, and heat pumps — and that's exactly the category modern air conditioning systems fall into. HMRC's guidance confirms that air source heat pumps are covered, and the split systems we install are reversible heat pumps: they extract heat from outside air to warm a room in winter, using exactly the same core technology as a system marketed purely as a "heat pump." The cooling function doesn't disqualify the installation — the heating function is what qualifies it.
What has to be true for a job to qualify
- It has to be a genuine installation, not just equipment
- The 0% rate applies to installation work carried out by the same VAT-registered business supplying the materials. Buying a unit separately and fitting it yourself, or having installation invoiced separately from supply, generally won't qualify.
- It has to be in residential accommodation
- The relief is aimed at homes. Commercial premises are covered by different rules entirely.
- It has to be a fixed, permanent installation
- Portable air conditioning units bought off the shelf don't qualify — the relief is specifically for systems that are properly installed as part of the building.
How much does this actually save you?
On a typical single-room split system installation costing around £2,000 including labour, the difference between paying 20% VAT and 0% VAT is roughly £400. On larger, multi-room installations, the saving scales proportionally — a £5,000 job saves around £1,000. It's applied directly to your invoice; you don't need to claim anything back separately or fill in any additional paperwork.
When does it end?
The 0% rate is confirmed to run until 31 March 2027. After that date, the relief is currently scheduled to revert to the reduced rate of 5% rather than jumping straight back to the standard 20% rate, though tax policy can change before then. If you've been considering air conditioning for your home, there's a genuine financial reason to act sooner rather than later rather than waiting.
A few honest caveats
This page is general information, not tax advice, and we're not accountants. Whether a specific installation qualifies depends on the details of your property and the work carried out, and the final VAT treatment is always confirmed on your written quote and invoice rather than assumed in advance. If you have an unusual situation — a mixed residential/commercial property, for example, or work being carried out alongside other building projects — it's worth asking us directly before assuming the 0% rate will apply.
Common questions about the 0% VAT relief
Do you pay VAT on air conditioning units?
Not when the unit is supplied and installed together in a domestic property as part of a qualifying job — the whole installation is zero-rated, unit included. You do pay standard 20% VAT if you buy the unit on its own and arrange installation separately, which is one reason a supply-and-fit quote usually beats a DIY-sourced one even before labour.
Does 0% VAT apply to commercial installations?
No. The relief covers residential accommodation only. A shop, office or industrial unit is standard-rated at 20%. Mixed-use buildings are judged on the part being worked on.
Do I have to claim the VAT relief myself?
No. It's applied at the point of invoice by the installer — there's no form to fill in and nothing to reclaim afterwards. Your quote and your invoice should both show 0% VAT. If a quote you've been given shows 20% on a domestic heat pump installation, it's worth asking why.
What happens after 31 March 2027?
The relief is currently legislated to revert to the reduced rate of 5% unless the government extends it. On a £1,450 single-room installation that difference is around £72; on a multi-room system it's meaningfully more.
Curious what your installation would actually cost at 0% VAT? Our quote calculator applies the relief automatically and shows you a real, itemised price.
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