How to cut your energy bills by making your home greener

Homeowners can install solar panels, insulation and a heat pump to reduce their bills - plus there’s no VAT to pay

solar panels on roof of a house
(Image credit: Getty Images)

If you’re feeling the sting from rising gas and electric bills, then you may be thinking about introducing some energy-efficient measures to your home to lower your future costs.

The good news is that while certain measures like solar panels and heat pumps can reduce your bills, the cost of installing them is also set to fall, thanks to the chancellor cutting the VAT rate to zero in his Spring Statement.

“Many of the solutions are ‘fit and forget options’ that save lots of money and improve the value of your home as well as cut carbon pollution,” says Angela Terry, an environmental scientist and founder of campaign group One Home. 

From installing solar panels and a heat pump to adding wall insulation, we outline how much various measures cost, how to fit them, and how much it could trim off your energy bills. Some can also add value to your property.

Here’s what you need to know.

WHAT’S HAPPENING TO VAT?

From April 1, homeowners installing energy-saving materials like solar panels, heat pumps and roof insulation will not pay any VAT, after Rishi Sunak reduced the 5% rate to zero for the next five years. Wind and water turbines are also included. 

According to the Treasury, a typical family having roof solar panels installed would save more than £1,000 in total, and then £300 annually on their energy bills.

Previously, only certain homeowners installing particular measures qualified for a zero VAT rate. Now, everyone can enjoy the VAT relief, and strict limitations introduced by the EU will be scrapped.

Chris Gardner, co-founder of the property development lender Atelier, points out that building material costs “have been rising across the board” so “the chancellor’s surprise tax cut on energy-saving technology offers a welcome safety valve – both to the construction industry and to homeowners looking to save money on their energy bills”.

Heather Powell, head of property and construction at the accountants Blick Rothenberg, adds that an estimated saving of £1,000 for households is a good incentive to help the government achieve its carbon-zero target by 2050 - and have a big impact on the environment.

WILL SOLAR PANELS REDUCE MY ENERGY BILL?

Solar panels create electricity from the sun that you can use to power your home - which means you use less energy from the National Grid and ultimately lower your electricity bill.

Solar panels will set you back by around £5,000 and are best suited to south-facing roofs with no trees creating shade over them.

You don’t normally need planning permission, but check you have enough space; the average 3-4kW system size typically takes up 15-20m2 roof area.

You may be able to get a discount from your local authority as many of them encourage residents to put them on their roofs. From April, there is no VAT to pay on the cost of them.

Once you have them installed, you can also take advantage of the Smart Export Guarantee (SEG) by choosing a SEG tariff from an energy supplier. This pays you for the excess solar energy that you send back to the grid.

The tariffs can be fixed or variable, and suppliers set their own rates, so shop around to find the best one for you. Use the Energy Saving Trust’s solar panel calculator to see how much you could save.

To add to the good news - solar panels will improve the rating on your energy performance certificate (EPC), which will help increase the value of your home.

SHOULD I INSTALL AN ENERGY-SAVING HEAT PUMP TO CUT GAS BILLS?

If your gas-guzzling boiler is becoming costly, switching to an eco heat pump could reduce costs and help boost your green credentials as it cuts your carbon emissions. 

It will cost around £10,000 to £12,000 to install the pumps, but if you wait until April, then you could also benefit from a government grant that could slash around £5,000 off the bill.

The government has promised homeowners up to £5,000 to install an air source heat pump or biomass boiler in place of existing gas or oil heating and up to £6,000 for ground source heat pumps.

Most homeowners and landlords in England and Wales will be able to participate, but new-build properties are excluded. The Boiler Upgrade Scheme is part of the government’s ambition to phase out gas boilers.

From April, there is no VAT to pay on the cost of them, thanks to the chancellor’s Spring Statement announcement.

A heat pump captures heat from outside and moves it into your home. They are cheaper to run than conventional boilers, so after the initial outlay you should save money on your heating bill.

According to One Home’s Terry, if you have a very old boiler, then it is worth replacing, especially if it's not a condensing boiler.

DOES INSULATION CUT COSTS?

Insulating your home could save you up to £500 a year on energy bills, according to the Energy Efficiency Infrastructure Group.

It may cost around £600, but the savings are big and it should last for 40 years - that’s £20,000 in savings.

Heat rises so the first step is to insulate your loft to a depth of 30cm. “This can be done in an afternoon and loft boarding can be added on top using stilts so the mineral wool is not squashed down and there is still storage space available,” says home expert Terry.

“Wall insulation can stop up to a third of energy escaping. Cavity wall insulation is quick and comes with a 25-year warranty. This could save £300 a year and cost around £600 to install.”

Don’t forget to check for drafts in your home. Draft proofing is quick and simple: foam rolls with self-adhesive backing can help plug the gap around doors and windows. 

QUICK WAYS TO SAVE MONEY ON ENERGY COSTS

Don’t forget, there are some simple things you can do immediately to keep energy costs down. Here are a few small, but effective, ways to keep a lid on costs: 

Keep temperatures to 19C and lower heating levels in rooms you don't use often. Switch on heating and hot water only when needed.

Get a smart meter from your energy supplier if you can. This will give you more accurate bills, as well as a handy display panel so you can see how much energy you are using. This is particularly useful to see how much energy your tumble dryer is using or how much an overfilled kettle can add to your electricity bill. 

Ensure your washing machine and dishwasher are full before switching them on.

Turn off appliances at the plug when not in use, and consider lining curtains to make them more thermally efficient

If you only have single glazing, you can get double glazing quickly with a few pounds and a hairdryer. Simply apply double-sided tape around the window frame, add a large sheet of secondary glazing film across the window and cut to size. Use a hairdryer across the film to remove any creases.

Upgrade your ordinary lightbulbs to LED light bulbs, which cost a lot less in the long run.

I RENT MY HOME - WHAT CAN I DO TO REDUCE MY ENERGY BILLS?

If you rent your home, you can ask your landlord to help with energy-saving measures. If the property’s EPC rating is an F or G, the landlord is legally obliged to improve the standard.

You can also point out that some of these measures could increase the property’s value - as well as making you a happier tenant.

Ruth Emery is contributing editor at The Money Edit. Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.