VAT on Domestic Electricity Cut to 0% from 1 October 2026: Does Your Business Benefit?
VAT on domestic electricity in Great Britain fell from 5% to 0% on 1 October 2026, and the Autumn Budget extended the zero rate to 30 June 2027. Most business electricity does not qualify, but charities, residential providers and some small users may.
By Entrepreneur Group · Published · Updated
From 1 October 2026, VAT on domestic electricity in Great Britain falls from 5% to 0%. The temporary zero rate was due to run until 31 March 2027, according to HMRC's Revenue and Customs Brief 10 (2026). It applies to supplies that previously qualified for the 5% reduced rate, so most business electricity, which is charged at the standard rate, does not benefit. The Autumn Budget on 28 October 2026 extended it to 30 June 2027.
Updated 30 October 2026: the Budget extended the zero rate from 31 March 2027 to 30 June 2027. The end date and FAQ below have been updated.
The cut was announced on 21 July 2026. It applies in England, Scotland and Wales only. In Northern Ireland, qualifying supplies stay at 5%.
Who benefits
HMRC says there is no change to which supplies qualify. They include electricity for domestic use and for a charity's non-business use, as explained in VAT Notice 701/19.
Kreston Reeves lists organisations that may benefit because some of their supplies already qualify for the reduced rate: charities (including academies), residential care providers, housing associations, private schools with boarding houses, NHS trusts with staff accommodation, other residential accommodation providers, and businesses whose usage is small enough to fall under HMRC's de minimis rules. It notes that mixed-use supplies can qualify where at least 60% of consumption is for qualifying use, and that electricity for business use generally does not qualify.
Simply Business notes that small businesses that are not VAT-registered and qualify for domestic energy relief also benefit, while non-domestic tariffs at the standard rate do not change.
What suppliers and customers should check
For bills that span 1 October, HMRC says suppliers may work out the VAT based on when the electricity was used. It recommends meter readings to split usage between the two rates, though other fair and reasonable methods are allowed.
If your business might qualify, this is editorial guidance on what to check, not tax advice:
- Look at your bill. See which VAT rate your supplier charges. If it is 20%, the cut does not apply to you. If it is 5%, check that it drops to 0% on usage from 1 October.
- Check your declarations. Charities, residential providers and others using reduced-rate certificates should make sure they are up to date. Kreston Reeves warns that HMRC can pursue the customer, not the supplier, if a declaration turns out to be wrong.
- Mixed-use premises. If you run a business from premises that are partly residential, ask your supplier or adviser how your supply is classified.
- Working from home. If you are a sole trader working from home, your household electricity bill benefits. How you claim business use of home costs is a separate matter for your accountant.
How long it lasts
The zero rate is temporary. It was originally due to end on 31 March 2027, but the Autumn Budget on 28 October 2026 extended it. The government's Budget 2026 Overview of Tax Legislation and Rates (measure 2.20) says it will "extend the temporary VAT zero rate for domestic electricity supplies until 30 June 2027", with secondary legislation to be laid in early 2027. Qualifying supplies therefore stay at 0% rather than returning to the 5% reduced rate from 1 April 2027.
Frequently asked questions
When does the 0% VAT on electricity start and end?
The temporary zero rate of VAT for domestic electricity in Great Britain started on 1 October 2026. It was due to end on 31 March 2027, but the Autumn Budget 2026 extended it to 30 June 2027.
Do businesses get 0% VAT on electricity?
Generally no. Electricity for business use is charged at the standard rate and is not affected. Supplies that already qualified for the 5% rate, such as domestic use, charity non-business use and some small de minimis supplies, move to 0%.
Does the electricity VAT cut apply in Northern Ireland?
No. HMRC says qualifying electricity supplies in Northern Ireland remain at the 5% reduced rate.
Sources
- HMRC: Revenue and Customs Brief 10 (2026): temporary zero rate of VAT for domestic electricity in Great Britain (8 September 2026) (reviewed 27 October 2026)
- Kreston Reeves: VAT on electricity cut to 0% from October 2026 (22 July 2026) (reviewed 27 October 2026)
- Simply Business: Autumn Budget 2026 predictions for small businesses (reviewed 27 October 2026)
- HM Treasury and HMRC: Budget 2026 Overview of Tax Legislation and Rates (measure 2.20) (reviewed 30 October 2026)