ROOF Blog

People who generate electricity from home wind turbines and solar panels will not have to pay tax on the money they make by selling it to the national grid, the Chancellor announced in the pre-Budget report.

From April 2010, the £900 a year they typically make from electricity sales to the grid under so-called ‘feed-in tariffs’ will be tax-free. This will save a basic-rate taxpayer £180 a year and a higher-rate taxpayer £360 a year.

The government also announced that it would take steps to encourage poor households to generate their own electricity.

Although home generation equipment often pays for itself over its lifetime, the Treasury said, the initial costs can discourage low-income families from installing it.

Tax rebates for people who ‘go green’ by installing solar panels or wind turbines on their homes or swapping their company car for an electric vehicle will be announced by Alistair Darling tomorrow.

Although his pre-Budget report will include few giveaways as he promises to rein in a £180bn budget deficit this year, the Chancellor will give householders and drivers a financial incentive to play their part in saving the planet.

At present, people who sell electricity to the National Grid are taxed on the income. In future, it will be exempt from tax.

A householder on basic rate tax selling £900 of electricity to the grid from April would receive the full amount, instead of £720 as at present.

The government has unveiled its vision of hi-tech homes with ‘smart’ meters acting as a cornerstone of a more efficient, greener electricity grid system.

British Gas and other power suppliers have been given responsibility for installing meters in each of Britain’s 26m homes by 2020, enabling them to read consumption levels remotely and end the use of estimated bills.

The gadgets would also allow homeowners to monitor their own gas and electricity usage – and production if they have solar panels or wind turbines.

However, a row over the £8.5bn outlay for smart meters threatened to overshadow the announcement with critics warning that the energy companies might pocket the benefits.

The Department of Energy and Climate Change (DECC) said the cost of the scheme would be dwarfed by the £14.5bn of expected savings as power companies reduce administrative costs and consumers benefit from lower bills.

The number of households in fuel poverty, where at least 10 per cent of income is spent on gas and electricity, rose by 15 per cent to four million in 2007, statistics from the Department for Energy and Climate Change show. A projection for this year suggests there are 6.6 million British homes in fuel poverty, almost treble the number five years ago. Campaigners said ministers would miss their target of removing all households containing the elderly, disabled and poor from fuel poverty by next year. The biggest factor in the increase is the doubling of energy prices since 2002. Responding to these figures, the government announced a four-step plan to help the fuel poor, including forcing suppliers to increase insulation, funding energy efficiency makeovers for 90,000 homes, making social tariffs compulsory and toughening regulation to combat ‘market abuse’.