Electricity VAT Cut 2026: 0% Rate Extended to July 2027

Changes to energy bills can be difficult to keep track of, particularly when a tax change overlaps with price-cap adjustments and other support schemes. This guide looks at the temporary electricity VAT reduction, explains how it works in practice and answers the questions householders may have about their bills. It also examines the differences in arrangements across the UK and what the latest Budget means for the months ahead.

The rules are not identical across every part of the UK, and the reduction does not affect every item on an energy bill. The sections below explain which supplies qualify, how suppliers apply the change and what to check if your bill does not look right.

Change at a glance

VAT on qualifying domestic electricity in Great Britain is temporarily reduced from 5% to 0%

Old VAT rate

5%

Before 1st October 2026

Temporary rate

0%

From 1st October 2026

Extended until

30th June 2027

Following the Budget

Who is affected?

Qualifying domestic electricity supplies in England, Scotland and Wales are covered by the current 0% rate. The Budget says comparable VAT relief is expected in Northern Ireland from April 2027, with details still to be confirmed.

What do you need to do?

Nothing. Your supplier should apply the VAT change automatically. Check your next bill, but remember that your total energy bill may still rise or fall for other reasons.

Potential savings are estimates, not guarantees. The Budget says the extension is expected to reduce the annualised price-cap figure by around £50 in April 2027; your actual saving depends on electricity use and prices.

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VAT on electricity: what is actually changing?

Qualifying domestic electricity in Great Britain is normally charged at 5% VAT. The temporary 0% rate has applied since 1st October 2026 and now covers qualifying electricity supplied up to 30th June 2027. The electricity unit charges and daily standing charge are included.

What changes, and what stays the same?

Changes

VAT on qualifying domestic electricity falls from 5% to 0%, including the electricity unit charges and standing charge.

Stays the same

Domestic gas remains at 5% VAT, and your energy unit rates and standing charges can still change.

The measure applies to qualifying supplies in England, Scotland and Wales. Northern Ireland has a separate arrangement.

The temporary 0% rate covers qualifying electricity charges, including the electricity you use and the daily electricity standing charge. It applies in England, Scotland and Wales. Domestic gas and other domestic fuels remain subject to 5% VAT.

The temporary 0% rate applies to qualifying electricity supplied from 1st October 2026 to 30th June 2027 inclusive. The 5% reduced rate is expected to return from 1st July 2027 unless the rules change again.

HMRC has confirmed that the change applies to England, Scotland and Wales. Other types of domestic fuel, including qualifying domestic gas, remain at 5% VAT.

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When will I see the change on my bill?

Your supplier should apply the correct VAT automatically, so you do not need to apply. The 0% rate applies to qualifying electricity supplied from 1st October 2026, including the electricity standing charge. If a bill spans the changeover date, charges for electricity supplied before 1st October remain subject to the previous rate.

Your bill may straddle the changeover date

Before 1st October5% VATApplies to the relevant qualifying electricity supplied before the change.

From 1st October0% VATApplies to qualifying electricity supplied during the temporary zero-rate period.

If you normally submit meter readings, keeping one around the changeover date may help. Smart meters may provide the supplier with the information automatically.

If you normally submit meter readings, taking one around the changeover date can help keep a record of your usage. Smart meters may send readings automatically, so you may not need to do anything.

If you normally provide meter readings, taking one around the changeover date may give you a useful record of how much electricity you had used before the new rate started. Smart meters may provide the supplier with the information automatically.

How much could you save?

The government originally estimated an average saving of £45 a year from the electricity VAT cut. This is an annualised figure, not a guaranteed amount for every household. Your actual saving during the temporary period will depend on your circumstances and electricity use. The Budget now estimates that extending the cut will reduce the annual Ofgem price-cap figure by around £50 in April 2027.

Budget 2026: what the extension means

Original estimate£45Annualised saving

April 2027 estimateAround £50Off the annual price-cap figure

These are government estimates, not cash payments or guaranteed savings. Your actual bill depends on how much electricity you use and the rates you pay.

It is also worth clearing up a common misunderstanding: going from 5% VAT to 0% does not mean your electricity bill becomes 5% cheaper overall. The 5% VAT is added to the underlying electricity charges, so removing it reduces the final amount by less than 5% of the total bill.

Your own saving will depend on how much electricity you use and the price your supplier charges. Someone who uses a lot of electricity will generally have more VAT to remove than someone who uses very little.

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Electricity VAT 2026: Will My Whole Energy Bill Be Cheaper?

Your whole energy bill will not necessarily fall by the amount you might expect, because the VAT change applies only to qualifying electricity. Gas remains subject to 5% VAT, and many households pay for both fuels on the same bill.

There is another reason your total bill may not simply fall. Ofgem’s price cap is increasing from 1st October 2026. For a typical dual-fuel household paying by Direct Debit, the cap rises from £1,663 to £1,723 a year, although the amount you actually pay depends on your energy use and circumstances.

The October price-cap figures already take the electricity VAT reduction into account. Ofgem says the average electricity unit rate for a standard variable tariff paid by Direct Debit will be 26.32p per kWh from October, with a daily standing charge of 54.83p. These electricity figures do not include VAT during the temporary zero-rate period.

So you could see your electricity costs fall while your total gas-and-electricity bill does not fall by the same amount. If you use a lot of gas, changes in gas costs can have a bigger effect on the overall bill.

If you want to understand the wider October energy changes, see our Energy Price Cap: What It Means for Your Bill.

What if I’m on a fixed electricity tariff?

The VAT reduction is not limited to people on standard variable tariffs. The government says it also applies to fixed energy tariffs where you have already locked in your rate.

You do not need to change your electricity tariff

The change should be applied automatically to qualifying electricity supplies. You do not need to switch tariff or make a separate claim.

What if I use a prepayment meter?

If you use a prepayment meter, VAT is currently included when you add credit to your meter.

From 1st October 2026, VAT will no longer be applied to qualifying electricity. The government says you do not need to make a separate claim, and the change should be reflected automatically when you top up.

What if I rent my home?

If you pay your own electricity bill, the VAT reduction should work in much the same way whether you rent your home or own it.

If electricity is included in your rent, a service charge or another arrangement where you do not receive the electricity bill yourself, things can be different. You may not see a separate reduction because you are not the person being charged VAT directly by the electricity supplier.

If that applies to you, check your tenancy or payment arrangement rather than assuming the saving will automatically reduce what you pay your landlord.

What if I own my home?

If you receive a qualifying domestic electricity supply and pay your supplier directly, the VAT reduction should be applied automatically from 1st October.

You do not need to register for the scheme or submit a claim.

Does the electricity VAT cut apply where I live?

Northern Ireland

The Great Britain 0% VAT rate does not currently apply in Northern Ireland, where qualifying electricity remains subject to 5% VAT. The Budget says comparable relief is expected from April 2027, but the arrangements still need to be confirmed.

However, Northern Ireland is not simply being left without support. A separate Household Electricity Discount Scheme provides eligible households with £63 of electricity bill support in 2026. Suppliers began applying the discount automatically from 6th October 2026. Households do not need to apply.

That is a different scheme from the Great Britain VAT cut, so Northern Ireland should not be described as receiving the VAT reduction itself.

Do I need to do anything?

For most households covered by the change, there is nothing to apply for: your supplier should apply the new 0% VAT treatment automatically. It is still sensible to check your first relevant bill after 1st October, paying attention to the electricity section, VAT treatment and dates covered. If you normally submit meter readings, keep one from around the changeover date as a useful record.

It is still sensible to check your first relevant bill after 1st October. Look at the electricity section, the VAT treatment and the dates covered by the bill. If you normally submit meter readings, keeping a reading around the changeover date can also give you a useful record.

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Why could my electricity bill still go up?

Removing VAT does not freeze the underlying cost of electricity.

Energy prices can change because of wholesale costs, network costs and other elements that feed into the price cap. From 1st October 2026, Ofgem’s price cap for a typical dual-fuel household paying by Direct Debit rises by 4% to £1,723 a year.

That figure is not a prediction of what you personally will pay. The price cap limits unit rates and standing charges for people on default tariffs. Your actual bill depends on how much energy you use, where you live, your meter and how you pay.

The VAT reduction is already reflected in Ofgem’s October electricity rates, so it is important not to compare headline price-cap figures from different periods without taking the VAT change into account.

For the wider picture of what’s changing in October, you can also read our guide to the changes coming in October 2026.

What this means for you

If you pay your own electricity bill: You should automatically benefit from the 0% VAT rate if your supply qualifies.

If you’re on a fixed tariff: You should still benefit. The VAT change applies even though your underlying tariff is fixed.

If you use a prepayment meter: The VAT should stop being charged when you top up qualifying electricity from 1st October.

If you’re a renter and electricity is included in your rent: You may not receive a conventional electricity bill, so the way the saving reaches you can depend on your arrangement with your landlord or provider.

If you’re in Northern Ireland: The Great Britain VAT cut does not apply, but eligible households receive separate £63 electricity bill support in 2026 through the Household Electricity Discount Scheme.

How to check your bill

When you receive a bill covering the new VAT period, check:

• how the amount compares with an earlier bill, bearing in mind that prices and your usage can change

If you think the VAT treatment on your qualifying electricity supply is wrong, contact your supplier and ask them to explain how they have calculated the bill.

What happens after July 2027?

The Budget announced on 28th October 2026 that the temporary 0% VAT rate will remain in place through 30th June 2027, extending it by three months beyond the original 31 March end date. The Government estimates that the extension will reduce the annualised energy price-cap figure by around £50 in April 2027. Your actual saving depends on how much electricity you use and the prices that apply to your tariff.

The temporary 0% rate currently covers qualifying electricity supplied up to 30th June 2027. We will update this article if the government announces any further change.

Is VAT being completely removed from electricity bills?

VAT is being reduced from 5% to 0% on qualifying domestic electricity supplies in Great Britain for the temporary period from 1st October 2026 through 30th June 2027. It is not a permanent removal of VAT from electricity.

Does the electricity VAT cut apply to Scotland?

Yes. Qualifying domestic electricity supplies in Scotland are covered.

Does it apply to Wales?

Yes. Qualifying domestic electricity supplies in Wales are covered.

Does it apply to England?

Yes. Qualifying domestic electricity supplies in England are covered.

Does it apply to Northern Ireland?

The Great Britain 0% VAT rate does not currently apply in Northern Ireland, where qualifying electricity remains at 5% VAT. The Budget says comparable VAT relief is expected to apply there from April 2027, with details still to be confirmed. Eligible households also receive separate £63 electricity bill support under the 2026 Household Electricity Discount Scheme.

Will my electricity bill automatically become cheaper?

The VAT charged on qualifying electricity should fall to 0%. Your total bill may not fall by the same amount because your usage, tariff and other energy costs can change.

Do I need to contact my supplier?

No. The VAT reduction should be applied automatically. You can check your first relevant bill to make sure the change has been reflected.

Does the VAT cut apply to fixed tariffs?

Yes. The government has confirmed that the change also applies to fixed energy tariffs.

Does it apply to prepayment meters?

Yes. From 1st October 2026, VAT will no longer be applied to qualifying electricity when you top up.

Does the change apply to gas?

No. Domestic gas remains subject to 5% VAT.

How much money will I save?

The government’s earlier estimate was around £45 a year on an annualised basis. The Budget’s separate estimate is that extending the temporary VAT cut will reduce the annual Ofgem price-cap figure by around £50 in April 2027. These are estimates, not guaranteed payments, and your actual bill depends on how much electricity you use and the prices you pay.

What if my bill covers September and October?

The VAT treatment needs to reflect the relevant period. Electricity supplied before 1st October does not become zero-rated simply because the bill is issued after the change.

Does the change affect the energy price cap?

Yes. Ofgem included the electricity VAT reduction in its published price-cap figures for October to December 2026. The overall cap still rose because of other costs, particularly higher gas costs. The figures cannot be compared directly with the previous period because electricity VAT treatment changed.