Government Slashes VAT on Heat Pumps as Ireland Rises to Renewable Energy

As part of this year’s Budget 2025, the Government has announced a reduction in VAT on heat pump installations that will encourage even more Irish homeowners to cut the cord with fossil fuel heating systems for once and for all.

Although full details have yet to be confirmed, VAT on heat pump installations will be cut from 13.5% to 9%, adding further momentum to Ireland’s retrofitting movement. This year’s Budget contained the highest ever financial allocation for environmental initiatives including an increase in carbon tax on fossil fuels as well as more funding for household retrofitting and solar panel installation.

“This is a welcome move by the Government at a time when there’s an unprecedented number of Irish homeowners who want to install a heat pump in their house or apartment,” says April McHale, Strategic Planning & Operations Manager with Daikin Ireland.

“There is no time to waste on our 2030 climate targets,” she continues. “It is imperative that we persuade as many homeowners as possible to swap their oil or gas boilers for clean, renewable heat pump technology. Reducing VAT on heat pumps will definitely help – but even more is needed if we are to meet those targets.” 

In addition to a reduction in VAT, SEAI offers a range of generous funding options to offset the upfront cost of installing a heat pump. Homeowners can get an Individual Energy Upgrade grant of €6,500 towards a heat pump, or up to €10,500 for a heat pump as part of a full home energy upgrade through SEAI’s One Stop Shop service. SEAI also offers insulation grants of up to €8,000 to help people make their homes ‘heat pump ready’.

Earlier this year, the Government also announced a new low-interest loan scheme that allows homeowners to borrow up to €75,000 to cover the cost of retrofitting work that will improve their home’s energy performance (BER) by at least 20%.

Heat pumps are now installed in the vast majority of new build homes, while an estimated 400,000 existing homes around Ireland are heat pump ready, i.e. sufficiently insulated for the system to operate efficiently. (Any home built from 2007 onwards automatically qualifies for a heat pump grant from SEAI.)

However, it is also estimated that around half of all Irish homes have a BER rating of D or lower. Not only are these households missing out on the holistic benefits of a heat pump – comfort, efficiency, energy savings, reduced carbon footprint – but they are also wasting money trying to heat poorly-insulated homes with expensive oil or gas.

According to Daikin’s April McHale, these households have a big decision to make about how they are going to heat their homes and families in the future.

“The reduction in VAT on top of the SEAI grants is a great opportunity for anyone with an oil or gas boiler, especially one that is more than 10 years old, to switch to a heat pump now,” she says.

“If you wait until your boiler finally breaks down, you’re more likely to go for the quickest and cheapest fix which might not be the most sustainable option, either economically or environmentally,” April explains. “Do your research now, find out what grants you are eligible for, and you might be surprised at how affordable a retrofit is. Once you make the switch to a heat pump, you’ll never look back.”

Whether your home does not need a huge amount of work for a heat pump to work efficiently or is likely to require a full package of energy upgrades (a ‘deep retrofit’) via the One Stop Shop system, a detailed energy assessment of the building fabric will establish what needs to be done – and how to get there.

With the Government digging deeper than ever to help Irish homeowners switch to a heat pump, now is a good time to check in with your local installer. This time next year, you might be very glad you did.

Browse the Daikin range of heating and hot water solutions here.