You may already be aware that energy-saving home improvements can qualify for zero VAT. While the policy has been in place for some time, many homeowners are surprised by the impact it has on the cost of improving their property. In practical terms, it reduces the upfront cost of addressing a poorly insulated home.
The cost of living continues to rise and energy bills remain a major household expense. As a result. Homeowners are prioritising improvements that deliver measurable results: warmer rooms, lower bills and money spent where it genuinely makes a difference.
Unfortunately, the one thing people keep overlooking is: External Wall Insulation (EWI).
Especially now, while VAT on insulation retrofit is sitting at zero.
This one rule quietly transforms the cost-effectiveness of upgrading your home.
So What Does Zero VAT Actually Mean?
When insulation is supplied and installed together, the work qualifies for a 0% VAT rate. This is not a reduction or discount. No VAT is charged on either the labour or the insulation materials, lowering the overall installation cost.
For a typical external wall insulation project, this can amount to several thousand pounds in savings. There is no application process or waiting period. The saving is applied automatically and shown directly on the installer’s invoice.
The relief applies to the completed installation carried out by a VAT-registered contractor. Purchasing insulation materials yourself from a retailer or builders’ merchant will still include VAT, as the zero rate does not apply to materials bought separately.
How External Wall Insulation Transforms Your Home
Many houses, especially older ones, leak heat far faster than they can retain it.
External Wall Insulation basically wraps your home in a thermal coat. Not a patch or a quick fix. A proper layer around the outside of the building.
Once it’s on, it just gets on with it for decades.
What you actually notice:
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Heat stops escaping through solid walls
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Heating runs less
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Bills come down
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No more freezing cold walls
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Draughts calm down
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The outside of the house looks fresh again
It’s what’s called a fabric-first upgrade. You’re not trying to heat a sieve anymore, you’re fixing the building itself.
Real Numbers: What Zero VAT Means for Your Home
A typical External wall insulation project might cost: £8,000 - £20,000
With normal VAT at 20%, that adds £4,000.
With zero VAT, that £4,000 stays in your pocket
That four grand alone can:
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Cover a large portion of the scaffolding
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Allow for a higher-performance finish
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Or simply reduce the overall cost of the project
It’s the difference between “maybe one day” and “actually makes sense now”.
What If You Can’t Do It Externally?
Due to planning restrictions and perheps the area being too conservative, some places might not allow external wall insulation.
That’s where Internal Wall Insulation (IWI) comes in, and when done properly, it works very well.
One of the best setups going at the moment is:
Wood fibre boards with lime plaster
Why people like it:
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Proper insulation performance
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Walls can still breathe (important in older houses)
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Better indoor comfort
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Helps with moisture and condensation
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Ideal for solid wall or traditional properties
These systems also qualify for zero VAT when supplied and installed as an energy-saving measure.
As a result, properties where external insulation is not suitable still have an effective solution available.
Why Acting Now Matters
Tax policy does change over time.
The current zero-VAT rate reflects the Government’s support for improving the energy efficiency of existing homes, but it should not be assumed to remain in place indefinitely.
Acting now means you lock in lower installation costs, reduce your exposure to rising energy costs, feel comfort straight away and future-proof the house.
This is no longer a niche improvement anymore, it’s becoming the sensible thing homeowners do.
How to Make Your Home Warmer Without Overpaying
External Wall Insulation has always made technical sense, but zero VAT is what finally makes it financially obvious. Whether you insulate your entire home externally, combine external and internal solutions, or opt for internal wood fibre and lime systems, the numbers are firmly on your side. For homeowners who want the official guidance, the UK Government’s VAT guidance on energy-saving materials explains exactly how the relief works and what qualifies.