ESM 0% VAT Rate Ending 31 March 2027 — What to Do

Self Builders Energy Efficient RetrofitThe ESM 0% VAT Rate Ends 31 March 2027 — What Does This Mean for My Project?

The ESM 0% VAT Rate Ends 31 March 2027 — What Does This Mean for My Project?

The 0% VAT rate for qualifying energy-saving materials (ESM) under HMRC Notice 708/6 applies to supplies made on or before 31 March 2027. From 1 April 2027, qualifying ESM reverts to the 5% reduced rate — it does not become standard-rated at 20%. The date that determines which rate applies is the date of supply (the invoice date), not the date the contract was signed or the date payment is made. If your contractor invoices for qualifying ESM work after 31 March 2027, that supply will be at 5% even if the contract was agreed and the work was carried out while the 0% rate was in force.

Why this matters

For a £70,000 qualifying ESM package (insulation, heat pump, solar), the difference between the 0% and 5% rate is £3,500. For the same package against the pre-existing 20% standard rate for general building works, the position is more complex — but the deadline still determines the rate on the invoice. Projects where ESM installation is planned for early-to-mid 2027 should understand which supplies will be invoiced before and after the cut-off, because split-date contracts can carry two different rates.

The key distinctions

0% — qualifying ESM supplies invoiced on or before 31 March 2027

The 0% rate applies to qualifying ESM supply-and-install where the date of supply (invoice date) falls on or before 31 March 2027. The contract date and payment date do not determine the rate.

5% — qualifying ESM supplies invoiced from 1 April 2027

From 1 April 2027, qualifying ESM supply-and-install in domestic buildings reverts to the 5% reduced rate under the published HMRC position. It does not revert to 20%. The 5% rate will apply to all qualifying ESM invoices with a supply date of 1 April 2027 or later.

Contracts spanning the cut-off date carry two rates

A qualifying ESM installation that begins before 31 March 2027 and is invoiced partly before and partly after the cut-off date will carry two rates: 0% on the portion invoiced before the deadline and 5% on the portion invoiced after. Interim invoicing before the deadline is a commercially legitimate option where the work has genuinely been carried out.

Content of published guidance may be updated

The 31 March 2027 reversion date reflects the currently published HMRC position. Tax law and published guidance can be amended. All date-dependent claims should be verified against current HMRC guidance at the time of invoicing, not solely against materials prepared before the deadline.

Practical checklist

Identify which qualifying ESM elements in your project are expected to be invoiced before and after 31 March 2027

Confirm with your contractor when they intend to issue invoices for qualifying ESM works

Understand that the invoice date (date of supply) — not the contract date or payment date — determines the rate

For works spanning the cut-off, ask whether interim invoicing before 31 March 2027 is commercially appropriate

Verify the current HMRC position on ESM rates at the time of invoicing — guidance can be updated

Retain dated invoices, delivery records, and installation certificates for each qualifying element

HMRC notice references

HMRC Notice 708/6—Energy-saving materials — current VAT rates and published end date

HMRC VAT Act 1994 Schedule 7A—Reduced-rate supplies — energy-saving materials

VATBuild is not affiliated with HMRC. References to HMRC publications are for informational purposes. Always consult a qualified tax adviser before making decisions about VAT on your project.

What VATBuild checks for this situation

VATBuild flags any qualifying ESM invoice where the supply date is approaching or has passed the 31 March 2027 deadline and checks whether the correct rate (0% or 5%) has been applied. It identifies invoices dated after the deadline that still carry the 0% rate, and invoices dated before the deadline that were incorrectly charged at 20% or 5%.