VAT guide · Last reviewed 24 September 2026
0% VAT on Electricity From 1 October 2026: What Changes on Your Bill
From 1 October 2026 until 31 March 2027, household electricity in England, Scotland and Wales carries no VAT at all. The rate falls from 5% to 0%, your supplier applies it automatically, and there is nothing to claim. Gas stays at 5%, and homes in Northern Ireland keep paying 5% on electricity.
Household electricity in England, Scotland and Wales
Key facts
- New rate
- 0% (previously the 5% reduced rate)
- Dates
- Electricity supplied from 1 October 2026 to 31 March 2027
- Where
- England, Scotland and Wales. Northern Ireland stays at 5%
- What is covered
- Household electricity including the standing charge, charities’ non business use, and small business supplies under the de minimis limit
- Not covered
- Gas, oil and other fuels. Business electricity that already pays 20%
- Saving
- The government puts it at around £45 a year for an average household
- Action needed
- None. Suppliers apply it for you
- The law
- SI 2026/987 and HMRC Revenue and Customs Brief 10 (2026)
What is changing, and why now
- 21 July 2026Cut announced by the Prime Minister
- 26 August 2026Details confirmed by the government
- 8 September 2026HMRC publishes Brief 10 (2026)
- 1 October 20260% VAT starts
- 31 March 2027Last day at 0%, unless extended
The Prime Minister announced the cut on 21 July 2026 as a cost of living measure for the winter. The Department for Energy Security and Net Zero confirmed the details on 26 August, and the legal change is made by The Value Added Tax (Supplies of Domestic Electricity) Order 2026. It temporarily adds a new Group 24 to the zero rate schedule of the VAT Act 1994, so qualifying electricity is treated as zero rated rather than reduced rated for six months.
HMRC followed with Revenue and Customs Brief 10 (2026) on 8 September, aimed mainly at energy suppliers. The measure is expected to cost about £850 million in 2026/27, and the House of Lords Library notes it is paid for by cancelling the digital ID programme.
It lands at the same time as the new energy price cap. Ofgem’s October cap rises 4% to £1,723 a year for a typical dual fuel home, driven by gas prices. Ofgem says the rise would have been about £45 bigger without the VAT cut. Gas bills go up by around 8%, while homes that only use electricity see an increase of less than 1%.
How much will you actually save?
Taking 5% VAT off does not cut your bill by 5%. VAT is added on top of the price, so removing it takes off one twenty first of the total, which is about 4.76%.
Price without VAT = bill including 5% VAT ÷ 1.05
Example: £100.00 ÷ 1.05 = £95.24, so you save £4.76
A typical home over a full year
Using Ofgem’s October to December direct debit rates for Great Britain (26.32p per kWh and a standing charge of 54.83p a day, both now with no VAT) and Ofgem’s updated typical usage of 2,500 kWh a year:
| Item | Amount |
|---|---|
| Units: 2,500 kWh × 26.32p | £658.00 |
| Standing charge: 365 days × 54.83p | £200.13 |
| Total with 0% VAT | £858.13 |
| Same bill with 5% VAT | £901.04 |
| Difference over a year | £42.91 |
That sits close to the government’s £45 average. The catch is that the zero rate only runs for six months, so the £45 is best read as a yearly rate of saving, not cash you will see in full.
What the six months are worth
Most homes use more electricity in autumn and winter, when lights stay on longer and heaters come out. The table below shows the saving across the whole 182 day window at the same rates, for different amounts of use during those six months.
| Type of home | Use, Oct to Mar | Bill at 0% | Would have been at 5% | Saving |
|---|---|---|---|---|
| Small flat, low use | 1,000 kWh | £362.99 | £381.14 | £18.15 |
| Typical home | 1,425 kWh | £474.85 | £498.59 | £23.74 |
| Home with an EV or heat pump | 2,500 kWh | £757.79 | £795.68 | £37.89 |
| All electric home | 4,000 kWh | £1,152.59 | £1,210.22 | £57.63 |
The “typical home” row assumes a little over half of a 2,500 kWh year falls between October and March. Your own figures depend on your region, tariff and how you pay: prepayment and pay on receipt of bill rates differ from direct debit. Enter your own numbers below.
Electricity VAT saving calculator
Change any figure to match your own bill.
From your bill or app, for the period you want to check
1 October 2026 to 31 March 2027 is 182 days
October cap, direct debit, GB average
October cap, direct debit, GB average
Same usage with no VAT
For any other VAT sum, our VAT calculator works at 0%, 5%, 20% or any custom rate.
Bills that cross 1 October or 31 March
Many bills cover a month or a quarter, so plenty will straddle one of the two dates. HMRC lets suppliers charge VAT according to when the electricity was actually used, and it recommends using meter readings to split the bill. Suppliers can use another method, such as sharing the units out by days, as long as the result is fair and reasonable.
Say your quarterly bill runs from 1 September to 30 November and you used 580 kWh. If a meter reading taken on 1 October shows 180 kWh were used in September, those units carry 5% VAT and the remaining 400 kWh used in October and November carry none. Without a reading, the supplier estimates the split.
Quarterly bill from 1 September to 30 November, 580 kWh in total
To get the fairest result:
- Give your supplier a meter reading on or close to 1 October. Smart meters that send readings do this for you.
- Do the same on or close to 31 March 2027, when the rate goes back up unless it is extended.
- Check that bills covering either date show two VAT lines, one at 5% and one at 0%.
Who gets the zero rate
The relief follows the existing rules for the 5% rate in VAT Notice 701/19. Anything that used to get 5% VAT on electricity in Great Britain now gets 0%.
| Who | Zero rated from 1 October? | Notes |
|---|---|---|
| Households | Yes | Houses, flats and other homes, including caravans lived in as a home. Covers every payment method, including prepayment. |
| Care homes, hospices and similar | Yes | Hospices, armed forces accommodation, and institutions where at least 90% of residents live there as their main home. |
| Charities | Yes, for non business use | For example a charity running free services. Business activities stay at 20% unless another rule applies. |
| Small business premises using little power | Yes | Supplies averaging no more than 33 kWh a day or 1,000 kWh a month count as domestic under the de minimis rule, whatever the use. |
| Mixed use premises | Often | If at least 60% of the electricity is for qualifying use, the whole supply qualifies. Below 60%, only the qualifying share does. |
| Businesses above the de minimis limit | No | Still 20%. Nothing changes. |
| Northern Ireland | No | Qualifying electricity stays at 5%. |
| Gas, heating oil, LPG, coal | No | Domestic gas remains at 5%. |
HMRC also treats the standing charge as part of the electricity supply, so it is zero rated along with the units.
If you run a business
Small premises on the de minimis rate
A small shop, office, studio or workshop that stays under 1,000 kWh a month has probably been paying 5% already. From 1 October those bills should show 0%. If you are not VAT registered, that is a straight saving. If you are VAT registered and were reclaiming the 5%, your net cost barely changes: there is simply less VAT on the bill and less to reclaim on your return.
Working from home
If you are a VAT registered sole trader or freelancer and reclaim VAT on the business share of your home electricity, there is no VAT to reclaim on power used between 1 October and 31 March. Your business share still counts as an expense for income tax, and that part is unaffected. Our guide to VAT for sole traders and freelancers covers home office claims in more detail.
Flat Rate Scheme users
Nothing changes for you. Your flat rate percentage stays the same, and you could not reclaim VAT on running costs like electricity anyway. See our Flat Rate Scheme guide.
Charities, care homes and housing providers
Suppliers usually decide the VAT rate from the declaration you gave them about how the electricity is used. Check it is current and correct before 1 October, particularly if your use has changed. Some organisations are on the wrong rate without realising, in either direction.
Heat pumps, electric cars and batteries
- Charging an electric car at home is part of your household supply, so it carries no VAT during the six months. Public chargers are separate and still charge 20%. A tribunal decision earlier this year said some public charging should be 5%, and HMRC is appealing.
- Heat pumps get cheaper to run this winter because all the power they use is zero rated. Installing one, along with solar panels and home batteries, is also zero rated until 31 March 2027. Our guide to 0% VAT on solar panels and heat pumps explains that relief.
- Gas boilers see no change. Gas still carries 5% VAT, and gas unit prices rise under the October cap.
What happens after 31 March 2027
As the law stands, electricity goes back to 5% VAT on 1 April 2027. It is the same day the zero rate on solar panels, heat pumps and batteries is due to end. Either could be extended at the Autumn Budget on 28 October, and there have been calls to cut VAT on gas as well. Nothing has been announced. Our Autumn Budget 2026 VAT guide tracks what could change and will be updated on the day.
Also on bills this winter
Around six million eligible households will get £150 off their electricity bill through the Warm Home Discount this winter, according to the government’s announcement. That comes on top of the VAT cut.
Frequently asked questions
Do I need to apply for the 0% VAT rate?
No. Your supplier applies it automatically to electricity used from 1 October 2026.
Is the standing charge zero rated too?
Yes. HMRC treats the standing charge as part of the supply of electricity, so it follows the same rate.
I have a prepayment meter. Do I get it?
Yes. The cut applies to all household electricity customers, however they pay.
Will my direct debit go down straight away?
Not necessarily. Direct debits are set from your expected yearly use, so the lower VAT may show up at your supplier’s next review. Ask them to recalculate if you are building up credit.
Has VAT on gas been cut?
No. Domestic gas still carries 5% VAT.
Does this apply in Northern Ireland?
No. Qualifying electricity in Northern Ireland stays at 5%.
Will my small café pay less for electricity?
Only if your supply falls under the de minimis limit of 1,000 kWh a month, or is mostly for qualifying use. Most cafés use more than that and pay 20%, which has not changed.
How do I work out an old bill without VAT?
Divide the total including 5% VAT by 1.05. A £60.00 bill becomes £57.14.
When does it end?
31 March 2027, unless the government extends it. From 1 April 2027 the rate returns to 5%.
For every current UK rate in one place, see our current VAT rate guide.
Current VAT ratesThis is general information, not tax advice. Check GOV.UK or speak to an accountant about your own position.