UK Budget keeps heat pump grant, cuts its funding and ends zero VAT on solar
Serguey Asael Shinder2 min readThe boiler upgrade scheme, the UK grant of up to £9,000 for replacing gas boilers with heat pumps, survived the Budget delivered by Chancellor John Healey despite speculation it would be scrapped. Its funding did not, pv magazine reported on 29 October.
The government committed to keep the grant at its current level of £400 million in 2027-28 and raise it "broadly in line with inflation" after that. The previous plan had allocated £600 million for 2027-28, £683 million for 2028-29 and £709 million for 2029-30, so the scheme loses about £700 million over the period. More than two thirds of UK households heat with gas.
Solar and battery buyers face a tax change. Home solar and battery storage currently carry no VAT; from 1 April 2027 the rate becomes 5%. At the same time the government published guidance for Warm Home Loans, under which it takes on part of lenders' risk so they can offer lower interest rates for solar, batteries and heat pumps. Households apply through participating lenders, installers or retailers, or their mortgage provider, and the loans can be combined with grants.
The Warm Homes Plan, which funds grants for low-income and social housing, receives an extra £335 million in 2027, but its multi-year budget is cut by £1 billion as a contribution to defence spending. A further £100 million, subject to approval, is aimed at up to 57,000 solar installations for social housing tenants this financial year. For utility-scale plants, the government opened a consultation on wholesale contracts for difference for existing solar farms, with responses due by 9 December.
What it means
The Budget moves support from grants to cheaper finance. Ending zero VAT adds about 5% to the price of a home system just as the loan scheme makes it easier to borrow for one, so the net effect for buyers depends on rates lenders actually offer. Installers have until April to fill order books at the current tax rate, which may pull demand into the coming winter.