Solar panel grants and UK funding – how does it work?

If you are considering installing solar panels at your home, the good news is that there is financial help available, be it loans or grants. You can even have panels on a subscription.

If you are interested in a grant, there are a number of options, depending on where in the UK you live and what you earn. Most are for those on low incomes in homes with poor insulation.

The biggest is the ECO4 scheme, or Energy Company Obligation 4, to give its full title, since it covers all the UK and can cover the entire cost of solar panel installation for low-income families.

Another perk, although it isn’t a grant as such, is the 0 per cent VAT which applies to solar panels. This compares to the standard value added tax rate of 20 per cent for most goods and services and the reduced 5 per cent rate which applies to your domestic electricity and gas bills.

The Treasury cut the rate from 5 per cent to zero per cent in 2022 and it said it will return it to 5 per cent in April 2027.

Then there’s the smart export guarantee, which offers a guaranteed price for the electricity you sell back to the grid. Again, not exactly a grant, but it can make balancing the books on a solar project easier and it’s open to all.

If you or someone you live with qualifies for state benefits, then the ECO4 grant could be for you.

It is a government efficiency scheme designed to tackle fuel poverty and cut carbon emissions.

As the name suggests, this is the fourth version of the scheme, it runs to 31 March 2026, and it is funded by big energy companies and administered by the energy regulator Ofgem.

You can get help if you earn less than £31,000 as a family, and receive one of the following benefits:

If you own your house, it must be rated D or lower for energy efficiency, and if you rent, it’s E or lower. If you are in social housing, you may get help for insulation and heating systems, but not solar installations.

You can apply with your energy company for up to £10,000 of funding. The scheme is for broad energy efficiency, so you might find that insulation and a smart thermostat are better uses of the funding for your energy use.

You can also receive help for air source heat pumps, electric storage heaters, loft and wall insulation, and smart heating controls.

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You can apply for the funding in England, Wales and Scotland, but not Northern Ireland, by contacting your local council or a big energy firm such as British Gas. A list of participating firms is on the Ofgem website.

About 18,700 homes have received solar panels or a heat pump through the scheme, according to data from the Department for Energy and Net Zero.

LA Flex, also known as ECO4 Flex, is an extension of the ECO scheme, and it allows local authorities – councils and local government, in this case – to set their own criteria for getting funding, which could mean that you might not need to be on benefits to qualify.

It is targeted at people vulnerable to the effects of the cold, including the elderly and those with health problems.

Your local government website should indicate if it is part of the scheme and what criteria it has chosen. So, if you earn a little above the £31,000 for most applicants for the ECO4 scheme, applying through your local council might be the best plan.

This scheme is targeted at disadvantaged communities in Wales on low incomes, and it is unusual in having no end date yet.

As with other schemes, you can apply for a plethora of improvements beyond a solar installation, including insulation and heating systems.

Naturally, this scheme is only for those who live in Wales. You will need to own a home or be a private tenant and receive a means-tested benefit or earn a low income.

Finally, you will need to be in a home with an energy efficiency rating of E or lower. If your rating is D and you or someone you live with has a health condition, you may also qualify.

The health conditions include respiratory diseases such as chronic obstructive pulmonary disease; circulatory diseases such as strokes and heart attacks; mental health struggles, dementia and developmental disorders.

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There is no listed claim limit, although the Welsh Government said in 2023, that the average claim is £2,457.

Contact Nest on 0808 808 2244 during office hours, Monday to Friday.

Solar Together is a scheme to group-buy solar panels and batteries, keeping costs down.

Solar panel providers bid for the chance to install the solar panels. It is more of a bulk discount than a grant. It is available in certain local authorities that have signed up to the scheme.

This is probably the scheme with the broadest appeal. It’s open to homeowners and tenants who have gained their landlord’s permission in council areas that are part of the scheme.

It is UK-wide and can offer discounts of about a third compared to going it alone.

Firstly, check that your council is part of the scheme. You can do that on the Solar Together website, where you can also apply.

Some councils have run the scheme in the past and then withdrawn, often due to a lack of interest. Solar Together encourages you to register your interest to show that there is demand if your local authority is not taking part.

Once you have applied, you wait until registration closes in your area. Then, solar installers are invited to bid for your work, with the cheapest winning.

This is particularly useful for those who don’t want to haggle themselves over their solar quotes.

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The government typically applies VAT to most things, with food and children’s clothes being the big exceptions. Domestic power also receives some relief, being charged at 5 per cent, rather than the 20 per cent levied on much of everything else.

In 2022, the government decided to cut the 5 per cent it added to solar installations to zero in a bid to help homeowners to pay for them and get the UK closer to zero emissions.

The government plans to end the tax break in 2027, and while it could be extended, chancellor Rachel Reeves has been looking for ways to raise money for the Treasury, and solar panels may find themselves in the firing line.

If you are buying panels and installation, you automatically get the tax break. The tax is simply not applied.

Replacing the previous feed-in tariff, the smart export guarantee was introduced in 2020 and ensures energy companies offer a rate for homeowners to sell their unused power back to the grid.

This is particularly important since many homeowners will use more power at home in the evening, while solar panels generate most power during the day.

It is available across the UK, and even if you have panels and a solar battery to use your panel-generated power later in the day, it’s important to have a good export agreement in place to get a good price for your power, since bigger homes may sell more than they use.

The guarantee means power companies must offer a rate for selling to the grid, so there is no need to apply. But it is worth shopping around to ensure your purchased power is cheap and that you are getting a good rate when you sell, too.

Home Upgrade Grabt 2 closed in March 2025 after two years.

Up to £630m of funding was available for local authorities to spend on energy efficiency and low-carbon heating in the second phase of the endearingly titled HUG, which offered up to £18,000 in some areas.

It was for people who live off the gas grid, making it rather more niche than ECO4, and you must earn as a household less than £36,000 to qualify.

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This scheme is for those living in Scotland and now covers solar thermal panels – ones which heat water rather than generate electricity – and hybrid units which do both.

A £5,000 interest-free loan is available for these panels.

The criteria are much more relaxed than other schemes and anyone in Scotland can apply if they are doing so for their own home.

The loans are interest-free, although a 1.5 per cent fee is applied to the loan. Even after this fee is applied, it is still a very cheap way to borrow for these panels if you live in Scotland

Ring Home Energy Scotland on 0808 808 2282 during normal office hours

We spoke to solar companies and fitters across the UK as well as insiders in the solar market to find you the best options on solar grants and discounts.

The Independent has been reporting on green energy and climate matters since it was founded in 1986. Since then, we have written hundreds of reviews and news stories on energy, including the best solar fitters and various other guides on green power.

Yes, the ECO4 scheme offers grants and there is also support for Welsh families through the Welsh Government warm homes nest scheme.

Yes. Tenants will have to ask landlords for their permission to access some of these schemes, but most landlords will not object to improvements being made to their homes once they understand the nature of these schemes. The ECO4 scheme offers grants for tenants, as does the Welsh Government warm homes nest scheme.

It is possible to get free panels if you are on benefits or have a vulnerable family member living with you, such as someone with a serious health condition. The ECO4 scheme and the Welsh Government warm homes nest scheme can offer free installation for those who qualify.