VAT is one of the most confusing parts of an air conditioning quote. Some installers add 20%, some show 0% and some aren’t sure. The confusion comes from one fact: a reverse-cycle air conditioning system is, technically, an air source heat pump, and heat pumps installed in homes are on HMRC’s list of energy-saving materials.
This guide explains what HMRC’s VAT Notice 708/6 says, which jobs it covers and which it doesn’t. It is general information, not tax advice. On any job we price, we confirm the VAT on your quote.
The rule and the dates
HMRC zero-rates the installation of certain energy-saving materials in residential accommodation. The zero rate applies from 1 May 2023 to 31 March 2027. From 1 April 2027 the rate goes back to the reduced rate of 5%, not to 20%.
Air source heat pumps are on the list. HMRC adds two important qualifiers:
- only air source heat pumps that are permanently fixed qualify. Portable or moveable units do not;
- HMRC’s understanding is that “most air conditioning units are air source heat pumps”, but whether a particular product qualifies depends on the facts of each case.
So a fixed, reverse-cycle split system that can heat as well as cool may qualify. A portable unit on wheels never does.
It must be residential accommodation
The relief is for installations in residential accommodation, such as houses, flats and other dwellings. Notice 708/6 lists other residential buildings too, so check the notice if your property is unusual.
The standard rate applies to installations in hotels, inns and similar establishments, hospitals, prisons and similar institutions. Offices, shops, restaurants and other business premises are standard-rated as well. Since 1 February 2024, buildings used solely for a relevant charitable purpose can also qualify, which can matter for some charities and community buildings.
A home office inside your house is still part of your home. A separate office unit you rent is not.
Supply and install, not supply only
The zero rate is for the installation of energy-saving materials. When an installer supplies and fits a qualifying heat pump, the whole job can be zero-rated. HMRC also says that the sale of energy-saving materials by a retailer is always standard-rated. Buying a unit online and fitting it yourself therefore means paying 20% on the unit. (Fitting it yourself also runs into F gas law: see our guide to DIY pre-charged kits.)
Want it done properly? AirCon Doctor installs, repairs and services air conditioning and heat pumps across London and the South East, from our base in East Grinstead. We’re an F-Gas certified company and NICEIC approved. Get a fixed-price quote.
What this means for common jobs
| Job | Likely VAT position (general guide only) |
|---|---|
| Fixed heat pump air conditioning in a house or flat, supplied and fitted | Can be zero-rated to 31 March 2027, depending on the product and the facts |
| Air-to-water heat pump in a home | Zero-rated to 31 March 2027 |
| Cooling-only unit in a home | Not a heat pump, so not covered by this relief |
| Portable air conditioner | Standard rate |
| Air conditioning in an office, shop, hotel or restaurant | Standard rate |
| Servicing, repair or regas | Repairs and maintenance are not installation of energy-saving materials, so normally standard rate |
The table is a summary. HMRC decides cases on their facts, and the notice has more detail on mixed jobs and other works done at the same time.
Timing your installation before April 2027
The rate that applies depends on the tax point, which is normally when the work is done or paid for. If you want the zero rate, plan the job well before 31 March 2027. Spring is busy for installers, so leave time for a survey and quote first. Payments for work after 1 April 2027 will normally be at 5%, so if you are planning a larger multi-room project, factor that into your budget.
How our prices and VAT work
Our air conditioning prices are shown + VAT: a single room split system is £1,200–£2,200 + VAT, a 2-room multi-split £2,800–£4,500 + VAT and a 3–5 room multi-split £4,500–£8,500 + VAT. For a home, we look at the product, the property and how the system will be used, and we confirm the VAT on your quote. Air-to-water heat pumps in homes are priced at 0% VAT (£8,000–£16,000 before the £7,500 Boiler Upgrade Scheme grant).
If you’re also looking at grants, read our guide to the £2,500 air-to-air Boiler Upgrade Scheme grant. VAT relief and the grant are separate: you can qualify for one without the other.
Quick answers
Is air conditioning zero-rated for VAT in the UK?
Not as a rule. A fixed air source heat pump installed in a home is zero-rated until 31 March 2027. HMRC says most air conditioning units are air source heat pumps, but each case depends on the facts.
What happens to VAT on heat pumps after March 2027?
From 1 April 2027 the rate for qualifying installations in residential accommodation becomes 5%.
Does my business get 0% VAT on air conditioning?
No. Business premises, hotels, hospitals and similar buildings pay the standard rate. VAT-registered businesses may be able to reclaim it in the usual way.
Is a portable air conditioner zero-rated?
No. HMRC only includes air source heat pumps that are permanently fixed, not portable or moveable ones.
Related services
More advice
- The £2,500 Boiler Upgrade Scheme Grant for Air-to-Air Heat Pumps
- How Much Does Air Conditioning Cost in the UK? 2026 Complete Guide
- Air Conditioning Installation Cost: What the Quote Should Include
- Heat Pump vs Air Conditioning: What’s the Difference?
- All advice
This guide is general information, checked against the sources linked on 30 October 2026. It isn’t legal, tax or financial advice. Rules, grants and product ranges change, so check the current position before you rely on it.