0% VAT on Electricity Bills: What Changes in October 2026

What is changing on electricity bills?

The temporary electricity VAT cut changes the tax rate on qualifying supplies from 5% to 0% in Great Britain. It applies in England, Scotland and Wales from 1 October 2026 through 31 March 2027. HM Revenue & Customs says the qualifying-use rules themselves are not changing: the same domestic electricity that previously received the reduced 5% rate moves to the temporary zero rate.

The change covers the electricity charge and the daily standing charge on a normal household supply. Government guidance explains that suppliers total the electricity used and the standing charge before applying VAT. At 0%, no VAT is added to those qualifying charges during the six-month period.

This is not a rebate that arrives as a separate payment, and households do not need to make a claim. The supplier applies the tax rate through its billing or prepayment system. The government describes the measure as saving households an average of £45 a year, but an individual household’s saving during the six-month cut depends on its tariff and electricity use.

How much could the 0% VAT rate save?

Removing 5% VAT does not reduce a previous VAT-inclusive total by a full 5%. If electricity charges before VAT are £100, the old total is £105 and the new total is £100, so the saving is £5. Starting with a VAT-inclusive amount, divide by 1.05 to find the amount before VAT. The difference is the VAT that would no longer be charged.

For example, suppose comparable electricity usage and standing charges would have cost £84 including 5% VAT. The pre-VAT amount is £80: £84 ÷ 1.05. At 0% VAT, that component would be £80, a £4 saving. This isolates the tax change; the unit rate, standing charge or amount of electricity used may also change between bills.

Do not take 5% off Ofgem’s published electricity rates for 1 October to 31 December 2026. Ofgem states that its new electricity figures already have no VAT. Its Great Britain averages for a capped single-rate tariff paid by Direct Debit are 26.32p per kWh and a 54.83p daily standing charge. Regional, payment-method and meter-type rates differ.

• From a pre-VAT figure: old total = qualifying electricity charges × 1.05.
• From an old VAT-inclusive figure: pre-VAT amount = total ÷ 1.05.
• Illustrative tax saving: old VAT-inclusive amount − pre-VAT amount.

Fixed tariffs, variable tariffs and prepayment meters

The government says the VAT change includes fixed energy tariffs where the customer has already locked in a rate. It also applies to qualifying domestic electricity on variable tariffs. You should not need to leave a fixed deal or move to a standard variable tariff to receive the tax change.

For traditional prepayment meters, VAT has normally been accounted for when money is loaded onto the key or card. Government guidance says VAT will no longer be applied to qualifying electricity top-ups from 1 October. Smart prepayment customers should also see the change handled automatically through the supplier’s system.

The VAT cut does not make electricity free, remove the unit rate or remove the standing charge. It changes only the VAT added to qualifying charges. A Direct Debit payment may not fall by the exact saving straight away because it is a payment towards the account and can also reflect forecast use, credit or debt. Check the bill’s tariff and VAT breakdown rather than the payment alone.

What happens when a bill crosses 1 October?

A bill that covers dates before and after 1 October may show separate lines or calculations for the two periods. Check that the supplier has used the tariff and VAT treatment shown for each part of the bill. The exact rate may change at the same time, particularly for a standard variable tariff, so a lower VAT charge does not by itself prove what the final bill should be.

Take and submit a meter reading close to the changeover if your meter is not sending reliable automatic readings, and keep a dated photograph. That provides useful evidence of how much electricity was used around the change. Do not simply remove 5% from the whole bill: earlier electricity, gas, account adjustments and other items may be treated differently.

Ofgem warns that the October capped rates cannot be compared directly with the previous quarter solely by looking at the displayed figures because the VAT basis has changed. Use the actual rates on the supplier’s notice and compare like with like.

What is not covered by the temporary cut?

The 0% rate is for qualifying electricity in Great Britain. HMRC says other domestic fuels remain at 5% VAT across the UK, so the measure does not remove VAT from household gas. Public electric-vehicle charging is not treated as a qualifying domestic electricity supply and remains subject to the standard VAT rules.

Some small businesses, charities and residential care homes whose electricity already qualifies for the reduced rate can also benefit. The detailed qualifying-use rules matter for mixed domestic and business supplies, but they have not been expanded by this measure. An ordinary household on a domestic electricity tariff should not need to complete a VAT declaration or contact HMRC.

The temporary rate ends after 31 March 2027 under the published HMRC measure. Do not assume that 0% will continue beyond that date unless the government formally changes the law or announces an extension.

Why Northern Ireland is different

Electricity supplied in Northern Ireland is outside this Great Britain VAT measure. HMRC states that qualifying Northern Ireland electricity remains at the reduced 5% VAT rate. Northern Ireland also has a separate electricity market and is not covered by Ofgem’s Great Britain price cap.

Instead, the Northern Ireland Department for the Economy has announced a £63 Household Electricity Discount for eligible domestic accounts in 2026. It is due to be applied automatically from 6 October. Bill customers receive a £60 account credit before VAT, worth £63 after VAT, while prepay and keypad customers receive an equivalent £63 credit through their normal top-up process.

The Northern Ireland credit is a fixed one-off amount for 2026 rather than six months of 0% VAT. It is not means tested or based on consumption. Future Northern Ireland Renewable Obligation-related payments are planned for 2027 and 2028, but their values have not yet been confirmed.

What to check on your electricity bill

Keep the tariff-change notice from your supplier and check the first bill covering October carefully. Compare the meter readings, billing dates, kWh used, unit rate, standing charge and VAT line with the supplier’s notice. If the bill includes gas, make sure you are looking at the electricity section because gas remains at 5% VAT.

If qualifying Great Britain electricity dated within the temporary period appears to have 5% VAT added, ask the supplier to explain the calculation and correct any error. Keep the bill, tariff notice and meter evidence. For a cost estimate, enter readings and the rates actually shown for each period into the electricity bill calculator rather than using a national average.

• Check that the electricity dates fall within the temporary 0% period.
• Check whether the displayed unit rate and standing charge already include VAT.
• Separate electricity from gas and unrelated account adjustments.
• Query the supplier if its VAT line or period split is unclear.