Financial incentives to reduce energy costs

Cutting taxes is the key theme of the Spring Statement delivered by The Chancellor, Rishi Sunak, and VAT on the installation of energy-saving materials in residential properties will be cut to zero per cent.

Due to the Northern Ireland Protocol, the Executive will receive a Barnett share of the value of this relief until it can be introduced UK-wide.

The Value Added Tax (Installation of Energy-Saving Materials) Order 2022 has been made in the House of Commons to introduce the temporary relief from VAT in England, Wales and Scotland on energy-saving materials. The relief remains in force for the period from 1 April 2022 until 31 March 2027. The energy-saving materials included are: 

  • insulation for walls, floors, ceilings, roofs or lofts or for water tanks, pipes or other plumbing fittings
  • draught stripping for windows and doors
  • central heating system controls (including thermostatic radiator valves)
  • hot water system controls
  • solar panels
  • wind turbines
  • water turbines
  • ground source heat pumps
  • air source heat pumps
  • micro combined heat and power units
  • boilers designed to be fuelled solely by wood, straw or similar vegetal matter

Energy Company Obligation

The UK Government is expanding the Energy Company Obligation to £1 billion per year for 2022-26, requiring energy suppliers to improve the energy efficiency of low-income homes. This coincides with their plans to extend the minimum energy efficiency standards for the private rented sector in England and Wales. The UK Government’s aim is to help households save on energy bills and significantly reduce fuel poverty in the private rented sector.

Tax plan

A Tax Plan was set out, containing three key priorities. First, action will be taken now to help families with the cost of living. Second, there is an intention to cut and reform business taxes, to create a new culture of enterprise and the conditions for private sector-led growth. Finally, the proceeds of higher growth will be shared fairly with working people, through further tax cuts. 

Non-domestic buildings 

To support the decarbonisation of non-domestic buildings, the UK Government is introducing targeted business rates exemptions for eligible plant and machinery used in onsite renewable energy generation and storage and a 100 per cent relief for eligible low-carbon heat networks with their own rates bill. These measures will now take effect from April 2022, a year earlier than previously planned.

Cost of living

A rise in the National Insurance Contribution (NICs) threshold to £12,570 will take place from July 2022 which means 70 per cent of workers who pay NICs will pay less, even after accounting for the Health and Social Care Levy. Of those who benefit from the threshold increase, 2.2 million people will be taken out of paying NICs altogether.

Duty on fuel will be reduced from 23 March 2022 at 6:00 pm by five pence per litre for the next 12 months. 

The UK Government have doubled the Household Support Fund with an extra £500m. Ensuring the most vulnerable families continue to get support with their food, energy, and water bills.

Small business support

Measures to boost investment, innovation, and growth were also unveiled which includes a £1,000 increase to Employment Allowance for SMEs, taking effect from April 2022.

On top of the 50 per cent business rates relief for eligible retail, hospitality, and leisure properties, also coming in this April, a Help to Grow: Digital Scheme and the £1 million Annual Investment Allowance are also available to continue supporting UK businesses.

Apprenticeship levy

An assessment will take place on the apprenticeship levy to make sure the tax on the wage bills of major companies, which was introduced in 2017 to pay for skills training, is doing enough.

Income tax

The basic rate of income tax will also be cut by 1p in the pound in 2024 when the OBR expect inflation to be back under control, debt falling sustainably and the economy growing. The cut is worth £5 billion for workers, savers and pensioners and will be the first cut to the basic rate in 16 years.

We welcome today's announcement that VAT will be cut on the installation of energy saving materials in residential properties. With rising energy costs as well as looming energy efficiency targets for the property sector, financial incentives are well needed. We will be scrutinising the details of this scheme as they are released to ensure they have the maximum impact for all homeowners, including investors in the private rented sector and that landlords and letting agents can take full advantage of the change.
Timothy Douglas Head of Policy and Campaigns | Propertymark