VAT on domestic electricity in Great Britain is 0% from 1 October 2026 to 31 March 2027. It was 5%. The cut comes from the Value Added Tax (Supplies of Domestic Electricity) Order 2026, made on 7 September 2026. Northern Ireland stays at 5%, and so does every other domestic fuel.
What changed?
The government added a temporary zero rate for electricity supplied for "qualifying use" in England, Wales and Scotland. Qualifying use means domestic use or a charity's non-business use. Before 1 October these supplies carried the reduced rate of 5%.
| Supply | Before 1 October 2026 | 1 October 2026 to 31 March 2027 |
|---|---|---|
| Electricity for homes in Great Britain | 5% | 0% |
| Electricity for homes in Northern Ireland | 5% | 5% |
| Gas, heating oil, LPG, coal and logs for homes | 5% | 5% |
| Electricity for business use above the small-supply limit | 20% | 20% |
HMRC set out the detail in Revenue and Customs Brief 10 (2026), published on 8 September 2026.
Who this affects
Every household in Great Britain, but also some businesses that may not expect it.
- Small shops, offices and workshops. HMRC treats electricity of no more than 33 kWh a day, or 1,000 kWh a month, at one set of premises as domestic, even when a business buys it. That is the de minimis rule in VAT Notice 701/19.
- Mixed premises. If 60% or more of the electricity is for qualifying use, such as a flat above a shop on one meter, the whole supply counts as qualifying.
- Charities using electricity for non-business activities.
- Sole traders working from home. Your home supply is domestic, so it now carries 0%.
- Energy suppliers and resellers, who must charge the new rate and keep records of the change.
What it means for you
The saving depends on whether you can reclaim VAT.
If you are not VAT registered, the 5% was a straight cost, so you keep the saving. Say a small café that is not registered uses 800 kWh a month and pays £200 a month before VAT. That is an example, not a typical bill.
Before 1 October£200 × 5% = £10 VAT a month
From 1 October£200 × 0% = £0 VAT a month
Six months to 31 March£10 × 6 = £60 saved
If you are VAT registered and use the electricity for your business, you were already reclaiming the 5% as input tax (the VAT you pay on your costs). Now there is nothing to reclaim, so your net cost does not change. Make sure your bookkeeping does not still claim 5% on bills for usage after 1 October.
What about a bill that spans 1 October?
Suppliers can split the bill by when the electricity was used. HMRC recommends meter readings, and accepts any other method that gives a fair result.
Say a quarterly bill runs from 1 September to 30 November. Meter readings show 300 kWh used in September and 600 kWh after. At an example price of 25p a unit before VAT:
September, 5%300 × £0.25 = £75, VAT £3.75
From 1 October, 0%600 × £0.25 = £150, VAT £0
Whole bill at 5%, for comparison900 × £0.25 = £225, VAT £11.25
So the VAT should be £3.75, not £11.25. If your first bill after 1 October shows 5% on everything, send a meter reading and ask your supplier to check it.
What to do now
- Check your next electricity bill. It should show 0% VAT for usage from 1 October 2026.
- If you run small premises, check your usage. Under 1,000 kWh a month should count as domestic. If you are charged 20%, ask your supplier why.
- If you sell electricity, apply 0% to qualifying supplies in Great Britain and keep a record of the date and method used to split bills.
- Diary 31 March 2027. The zero rate ends then unless the law changes.
Our VAT on fuel guide covers every fuel rate and the small-supply rules. Use the VAT calculator to check the VAT on any bill.
What has not changed
- Gas and other heating fuels stay at 5%, including in Great Britain.
- Northern Ireland electricity stays at 5%.
- Business electricity above the small-supply limit stays at 20%.
- The qualifying rules. HMRC says the supplies that qualify are the same as before.
Source
The law is The Value Added Tax (Supplies of Domestic Electricity) Order 2026 on legislation.gov.uk, with HMRC's guidance in Revenue and Customs Brief 10 (2026) and VAT Notice 701/19.
Questions
Is there VAT on electricity from 1 October 2026?
Not on domestic electricity in England, Scotland and Wales. It is 0% from 1 October 2026 to 31 March 2027. Northern Ireland stays at 5%.
Does the 0% rate apply to business electricity?
Only if the supply counts as qualifying use. Small supplies of up to 1,000 kWh a month count as domestic, even for a business. Larger business supplies stay at 20%.
Is gas VAT cut too?
No. Gas, heating oil, LPG and other home fuels stay at 5%.
Do VAT-registered businesses save money?
Usually not. If you reclaimed the 5% as input tax, your net cost is the same at 0%. The saving goes to households, charities and businesses that are not VAT registered.
