From 1 October 2026 to 31 March 2027, household electricity in England, Scotland and Wales is charged VAT at 0% instead of 5%. You don't need to apply for it: suppliers stop adding VAT automatically, including on fixed tariffs and prepayment meters. Gas still carries 5% VAT, and electricity in Northern Ireland stays at 5%. The government says the cut takes around £45 a year off the typical bill under the Ofgem price cap.
This guide explains exactly what changed, using the government's own announcements, and shows how to check the saving on your own bill with simple maths. I checked every number below with a short Python script, and the official sources are dated so you can see how current they are.
The change was announced on 21 July 2026 and came into force on 1 October 2026. HMRC's policy paper, Temporary zero rate of VAT in Great Britain for domestic electricity (published 8 September 2026), sets out the details:
Technically, the order moves domestic electricity in Great Britain from Schedule 7A of the VAT Act 1994 (the 5% list) into a new Group 24 of Schedule 8 (the 0% list), keeping the same definition of what counts as qualifying use. In plain English: the same homes and users that paid 5% now pay nothing, for six months.
The government's news release of 1 October 2026 links the cut to rising global energy costs, tied to the conflict in the Middle East, and calls it part of a series of "everyday fixes" for household bills. HMRC's stated policy objective is targeted relief: electricity is used by more households than any other fuel, so cutting VAT on electricity reaches the largest number of people.
The timing matters too. October to March is when households use the most energy, so a winter-only cut puts the money where bills are highest.
The government says the cut keeps the Energy Price Cap £45 a year lower than it would otherwise have been. Your actual saving depends on how much electricity you use and what your supplier charges.
You can work out your own saving with one division. A bill that included 5% VAT is 105% of the pre-VAT price, so to remove the VAT, divide by 1.05:
from decimal import Decimal as D, ROUND_HALF_UP
def p(x): return x.quantize(D("0.01"), ROUND_HALF_UP)
for gross in ("100", "80", "1200", "950"):
g = D(gross)
net = g / D("1.05")
print(f"bill £{gross} incl 5% VAT -> £{p(net)} with 0% VAT, saving £{p(g - net)}")
Output:
bill £100 incl 5% VAT -> £95.24 with 0% VAT, saving £4.76
bill £80 incl 5% VAT -> £76.19 with 0% VAT, saving £3.81
bill £1200 incl 5% VAT -> £1142.86 with 0% VAT, saving £57.14
bill £950 incl 5% VAT -> £904.76 with 0% VAT, saving £45.24
So the saving is about 4.76% of your electricity bill (1 − 1/1.05). An annual electricity bill of around £950 gives roughly the £45 headline figure. A household using more electricity, for example with storage heaters, a heat pump or an electric car charged at home, saves more in pounds.
Don't calculate it as "5% of the bill". Five per cent of £100 is £5, but the real saving on a £100 VAT-inclusive bill is £4.76, because the VAT was 5% of the pre-VAT amount, not of the total. It's the same reverse-VAT mistake that trips people up with 20% VAT, explained in my guide on how to calculate VAT in the UK.
If you pay one combined direct debit for gas and electricity, only the electricity part drops. For example, a month with £60 of electricity and £50 of gas (both VAT-inclusive before the change):
e, gas = D("60"), D("50")
print("before:", e + gas, "after:", p(e / D("1.05") + gas), "saving:", p(e - e / D("1.05")))
before: 110 after: 107.14 saving: 2.86
Your direct debit may not change straight away, because suppliers usually review payments periodically. The saving still shows in your account balance.
No. HMRC's policy paper says the rate "will remain 5% on all other types of domestic fuel UK-wide". Gas, heating oil, LPG, coal and wood for domestic use all still carry 5% VAT. If you heat your home with a gas boiler, most of your winter bill may still include VAT, and the cut only touches the electricity you use for lights, appliances and cooking.
This is a common surprise when people look at their first post-October bill and see VAT still listed: check whether that VAT line belongs to the gas account.
No. The zero rate applies only to supplies in Great Britain (England, Scotland and Wales). HMRC states that supplies in Northern Ireland "will continue to be charged at the reduced rate", so electricity in Northern Ireland still carries 5% VAT and the measure has no impact on households there.
The government's explainer, Breathing space on your energy bill (26 August 2026), says the change includes fixed energy tariffs where you have already locked in your rate. VAT is a tax added on top of the unit rate and standing charge, so removing it lowers what you pay even though the fixed price itself doesn't move.
The 1 October news release adds that around a third of households are on fixed tariffs, which aren't affected by a rise in the price cap, and that the government expects suppliers to pass the VAT cut on to them too, so their bills could fall overall.
Prepayment customers get the cut as well. According to the government explainer, VAT is normally charged automatically on the money you load onto your key or card, and from 1 October 2026 it's no longer applied. In practice, the same top-up buys about 5% more electricity than before.
The government explainer says suppliers add up the electricity you've used in a period along with your daily standing charge and apply VAT to that part of the bill. Because VAT is removed from the whole electricity part, the standing charge also drops by the same proportion. Even a low-usage household benefits a little, since the standing charge is paid every day regardless of use.
The zero rate applies from 1 October 2026 to 31 March 2027. HMRC's impact section notes that suppliers will need to update their systems to change the rate from 0% back to 5% when the temporary rate ends on 31 March 2027.
The government explainer says the cut has been funded for the 2026 to 2027 financial year, through the cancellation of the digital ID programme. It doesn't promise an extension. With the Budget scheduled for 28 October 2026, any change would be announced there or later, so it's safest to plan on electricity VAT returning to 5% from April 2027.
Some do. The government explainer says small businesses, charities and residential care homes that already qualify for the reduced 5% rate on electricity, including through the existing VAT certificate and declaration process, also move to 0% this winter.
That covers supplies that count as "qualifying use": domestic use, non-business use by a charity, and supplies under the de minimis limit (small quantities that are treated as domestic). Most businesses on standard commercial tariffs pay 20% VAT on electricity and aren't affected. HMRC notes that the business-versus-non-business calculations and self-certification work exactly as before; only the rate changes.
Your bill or online account should break down the charges. Look for:
If your post-October electricity charges still show 5% VAT on a domestic account in Great Britain, contact your supplier first and ask them to explain the VAT on the bill.
The VAT cut sits alongside other measures the government mentioned in its 1 October announcement and earlier policy:
These are separate schemes with their own rules, so check eligibility for each on GOV.UK.
To add or remove VAT at 20%, 5% or 0% on any other amount, use my free UK VAT calculator.
Yes. The government says you don't need to do anything to claim the saving. Suppliers stop adding VAT to qualifying domestic electricity from 1 October 2026, including on fixed tariffs and prepayment top-ups.
About 4.76% of your electricity bill, because removing 5% VAT means dividing the bill by 1.05. The government estimates around £45 a year for a typical household under the price cap; heavy electricity users save more.
No. VAT on gas and all other domestic fuels stays at 5% across the UK. Only electricity in Great Britain is zero-rated.
No. HMRC says the zero rate applies only to supplies in Great Britain. Domestic electricity in Northern Ireland is still charged at the 5% reduced rate.
The zero rate runs until 31 March 2027. The government has funded it for the 2026 to 2027 financial year and hasn't announced an extension, so expect electricity VAT to return to 5% after that unless a future Budget changes it.
Yes. The government explainer specifically includes fixed tariffs where you've already locked in your rate. Your unit rate stays the same, but VAT is no longer added on top.
Most likely it's the gas part of a dual fuel bill, which still has 5% VAT, or part of the billing period falls before 1 October 2026. If domestic electricity used after 1 October in Great Britain still shows 5%, ask your supplier.
Only those that already qualified for the 5% reduced rate, such as charities using electricity for non-business purposes, residential care homes and small users under the de minimis limit. Standard business electricity is still charged at 20%.
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