Tax cuts for green technology

Against a backdrop of rising inflation, huge increases in fuel and energy costs and a significant fall in living standards, Chancellor of the exchequer, Rishi Sunak, has announced a number of measures, including some tax cuts, in his spring statement.  Following on from the already announced policies to help consumers pay energy bills, the chancellor has also declared further tax breaks for those investing in green technology.

The budget covered several issues of particular interest to the plumbing and heating industry, including:

• A 5p cut to fuel duty for motorists, to come into force at 6pm on 23rd March.
• 0% VAT payable by homeowners on energy saving materials such as insulation, heat pumps and solar panels, for those in England, Scotland and Wales. The 0% rate will stay in place for the next five years.
• Funding for the Household Support Fund to increase to £1bn from April.
• While the National Insurance increase of 1.25% is still going ahead, the earnings threshold (the amount people can earn before being taxed) will rise by £3000 to £12,570 per year.
• Employment training, including apprenticeships and the Apprenticeship Levy to be reviewed as part of a new ‘tax plan.’
• Business tax cuts to be announced in the autumn budget including changes to research and development tax credits and business investments.
• Employment Allowance to rise to £5000 in April.
• Plans announced to cut income tax from 20p in a pound to 19p before the end of parliament in 2024.

Kevin Wellman, CEO of the Chartered Institute of Plumbing & Heating Engineering (CIPHE) commented, “While we battle the cost of living rises, installers and the public alike will welcome the fall in fuel duty, and the rise in earning threshold for National Insurance. It is also encouraging to see the government support the most vulnerable households through increased funding for the Household Support Fund.

“There is good news for consumers looking to improve the energy efficiency of their homes and invest in green technology. The 0% VAT rate will help cut costs and increase demand. However, we must ensure systems are designed and installed correctly to offer the required energy savings. Savvy installers will be signing up to renewable training, such as the CIPHE’s Low Temperature Heating and Hot Water Systems in Dwellings qualification, to ensure they have the knowledge and skill to install such systems. 

“As was seen via the green homes grant scheme’s failure, the UK does not currently have enough trained installers of the green technologies supported by the VAT cut. I would have welcomed an immediate strategy to address this, but a review of employee training and the Apprenticeship Levy is long overdue. As we have documented in our manifesto, there is a dire need to kickstart apprenticeship starts in the plumbing and heating sector. Tax breaks for R&D will only help manufacturers become more innovative at a critical time for our industry, and we would urge the Government to be generous. Finally, in an industry that includes so many small businesses, it is good to see them get a boost of around £1,000 through the rise in the employment allowance.”

Engineers can find out more about the Low Temperature Heating and Hot Water Systems in Dwellings qualification at www.ciphe.org.uk/lowtempheating