VAT on electricity bills UK — what the temporary 0% rate means

Written by: EnergySwitch editorial team · Figures checked: 28 September 2026

Direct answer: From 1 October 2026 to 31 March 2027, VAT on qualifying domestic electricity in Great Britain (England, Scotland and Wales) is temporarily zero-rated. You do not need to claim — suppliers apply it automatically, including on fixed tariffs and prepayment top-ups. Gas stays at 5% VAT. Northern Ireland keeps the 5% reduced rate on qualifying electricity.

The government estimates an average saving of about £45 a year; Ofgem says that without the VAT cut, the October typical dual-fuel price-cap figure would have been around £45 higher. Your exact saving depends on how much electricity you use and your rates.

This guide covers what changes on the bill, who qualifies, and how the cut meets the October price cap. For full unit-rate tables, see our Ofgem energy price cap rates hub. For fix-vs-SVT decisions, see should I fix my energy deal before winter 2026?.

What is changing on 1 October 2026?

Until the end of September 2026, qualifying domestic fuel and power — including electricity — is charged VAT at the reduced rate of 5%. From 1 October 2026 through 31 March 2027:

HMRC’s tax information note and the DESNZ “Breathing space on your energy bill” page confirm these dates, the GB-only electricity change, and that households do not need to do anything for the reduction to apply. The measure was announced on 21 July 2026 and is temporary for the published window to 31 March 2027.

After that date, the default reading of the Order is a return to 5% on qualifying GB electricity unless government announces otherwise.

How does this show up on your bill?

Suppliers normally add 5% VAT to the electricity part of your bill: the units (kWh) you use plus the daily electricity standing charge. From 1 October 2026, that VAT on qualifying GB electricity should be £0.

In practice:

• Electricity unit rates and standing charges on your statement should reflect no VAT for the zero-rate period.
• Gas unit rates and standing charges still include 5% VAT.
• On a dual-fuel bill you still pay VAT on gas.
• On an electricity-only (or low-gas) bill, more of the total is affected — so the relative saving is larger.

Government guidance: the exact amount you save depends on your electricity price and usage. The ~£45 a year figure is an average estimate, not a fixed rebate on every account.

Who qualifies?

You are in scope if you receive a qualifying supply of electricity for domestic use (or a charity’s non-business use) in Great Britain, under the same rules that already applied to the 5% reduced rate. That includes:

• Households on standard variable (default) tariffs under the Ofgem price cap
• Households on fixed tariffs — the VAT change is automatic; fixing does not lock in 5% VAT on electricity for this window
• Prepayment meter customers
• Some small businesses, charities and residential care homes that already qualify for the reduced 5% rate (including via the existing VAT certificate / declaration process)

You are not covered by this temporary zero rate if you live in Northern Ireland (qualifying electricity stays at 5%), or if your supply is ordinary commercial electricity that does not qualify for the domestic reduced rate. The Order does not widen who qualifies; it only changes the rate from 5% to 0% for those who already would have.

Prepayment meters, fixed deals and SVTs

Prepayment (PPM): When you top up, VAT is normally charged on the money you load. From 1 October 2026, VAT will no longer be applied to qualifying electricity top-ups in Great Britain for the zero-rate period. No separate claim or meter visit is needed for the VAT change itself.

How that VAT change sits alongside the ~£45 typical PPM vs Direct Debit gap on the October default-tariff cap is covered in prepayment vs Direct Debit October 2026.

Fixed tariffs: Your contracted unit rates and standing charges (before VAT treatment) stay as agreed. The temporary electricity VAT cut still applies automatically. You do not need to re-sign or switch solely to get 0% VAT on electricity.

Standard variable / default tariffs (SVT): SVT customers in Great Britain remain under the Ofgem energy price cap for maximum unit rates and standing charges. From October, Ofgem’s published electricity averages for the cap exclude VAT; gas averages still include 5% VAT. The VAT cut is built into the October–December cap figures.

Myths cleared

“Do I need to claim?” — No. Government and Ofgem guidance say suppliers apply the change. There is no household claim form.

“Is gas also going to 0%?” — No. Gas remains at 5% for qualifying domestic supplies.

“Does this apply in Northern Ireland?” — No. Temporary zero rate is Great Britain only.

“Will my whole dual-fuel bill fall by 5%?” — No. Only the electricity portion loses VAT. Wholesale gas costs are also rising into the October cap period, so many dual-fuel households still see a higher typical capped level overall.

“Is the £45 a cash payment?” — No. It is an average-effect estimate (government saving framing; Ofgem’s “£45 higher without the cut” on the October typical dual-fuel figure), not a fixed £45 credit.

How the VAT cut interacts with the October 2026 price cap

Ofgem announced the 1 October – 31 December 2026 price cap on 26 August 2026. For a typical Direct Debit dual-fuel household (2026 TDCV):

Ofgem states that the VAT removal is reflected in the October update. Without it, the typical dual-fuel figure would have been around £45 higher. Higher wholesale gas prices are still pushing costs up; Ofgem frames most of the dual-fuel rise as gas-driven (gas about +8% in its press summary), with electricity-only / no-gas households seeing a much smaller increase of less than 1%.

Average GB Direct Debit rates (England, Scotland and Wales) for default tariffs, 1 Oct – 31 Dec 2026:

Important (Ofgem): costs cannot be compared directly to previous periods because electricity figures from October exclude VAT while earlier periods included 5% on electricity.

Full regional tables and payment-method typical levels live on our energy price cap page — this article does not duplicate them.

How the VAT cut shows up on the daily charge line (electricity down, gas up) is covered in our standing charges October 2026 guide.

Next cap period: levels for 1 January – 31 March 2027 have not been announced (due by 25 November 2026). The electricity VAT zero rate continues through that quarter to 31 March 2027, but Jan–Mar capped rates are separate and unknown until Ofgem publishes them.

Forecast vs official detail: January 2027 energy price cap forecast (Cornwall ~£1,999 is a scenario until Ofgem publishes).

Comparing deals while VAT is 0% on electricity

When you weigh a fixed quote against an SVT — or two fixes against each other — compare like-for-like bill cost for your usage, not a raw p/kWh glance across VAT regimes.

• From October, GB electricity quotes and capped SVT electricity rates should be on a 0% VAT basis for the zero-rate window; gas remains 5%.
• High electricity users (heat pumps, EVs, Economy 7) tend to benefit more from the VAT cut than low electricity users.
• Exit fees still matter if you leave a current fix early — see today’s cheapest fixed energy deals and how to switch energy supplier.

For live personalised quotes, compare energy deals with your postcode and usage. For whether fixing before winter makes sense, use our winter 2026 fix guide.

What to do next

1. Expect automatic application from 1 October 2026 on qualifying GB electricity — no claim.
2. Check your first bill or top-up after 1 October so electricity shows 0% VAT and gas still shows 5% if you have gas.
3. Do not treat the £1,723 or £45 figures as your bill — use your own kWh.
4. If you may switch or fix, run a personalised comparison and allow for the VAT change when reading electricity rates.
5. If you cannot pay, contact your supplier early. Separately, DESNZ notes around 6 million households may be eligible for the Warm Home Discount (£150 off electricity this winter) — check eligibility on GOV.UK.

Do I need to claim the 0% VAT on electricity?

No. For qualifying domestic electricity in Great Britain from 1 October 2026 to 31 March 2027, suppliers are expected to apply 0% VAT automatically. That includes fixed tariffs and prepayment top-ups. There is no household claim process for this temporary rate.

Does the VAT cut apply to gas bills?

No. Gas remains at the 5% reduced rate for qualifying domestic supplies. Only electricity in Great Britain is temporarily zero-rated for this period.

Does 0% VAT on electricity apply in Northern Ireland?

No. The temporary zero rate applies in England, Scotland and Wales only. Northern Ireland keeps the 5% reduced rate on qualifying electricity.

How much will I save from the electricity VAT cut?

The government estimates an average of about £45 a year. Ofgem has said that without the VAT intervention, the October typical dual-fuel price-cap figure would have been around £45 higher. Your saving depends on your electricity use and rates — it is not a fixed £45 credit.

How does the VAT cut affect the October 2026 energy price cap?

Ofgem has built the VAT removal into the 1 October – 31 December 2026 cap figures. The typical Direct Debit dual-fuel level is about £1,723 a year (up £60 / 4% from £1,663). Electricity capped averages for that period exclude VAT; gas still includes 5%. Period-to-period rate comparisons are distorted by the VAT change.

Will people on fixed energy deals get the VAT cut?

Yes. Government guidance says the discount is applied automatically by suppliers, including where you have already locked in a fixed tariff. The cut changes the VAT on qualifying electricity; it does not rewrite your contracted pre-VAT rates.

Sources (primary)

• Ofgem press release: Energy price cap will rise by 4% from October 2026 (26 August 2026)
• Ofgem: Changes to energy price cap between 1 October and 31 December 2026
• Ofgem: Energy price cap unit rates and standing charges
• GOV.UK: Temporary zero rate of VAT in Great Britain for domestic electricity (published 8 September 2026)

• GOV.UK: Breathing space on your energy bill (DESNZ, 26 August 2026)

Cross-checked against EnergySwitch energy price cap hub content so this guide extends that page rather than replacing its rate tables.

Figures checked against the primary sources above on 28 September 2026. This article is written for Great Britain households unless Northern Ireland is stated. Your bill depends on usage, region, meter and payment method. EnergySwitch is not Ofgem Confidence Code accredited; always verify live tariffs before switching.