September 10, 2026
Article
In July of this year the government announced that VAT rate applicable to domestic electricity will be reduced from 5% to 0%.
The reduction applied from 1 October 2026 and is currently planned to remain in force until 31 March 2027.
The reduction applies to both the charge for electricity used and the standing charge. The reduction does not however affect supplies of gas and VAT will continue to be applied to these.
The zero-rate will apply to domestic electricity charges which is rather broader than the term may suggest and includes supplies to caravans, care homes & other residential establishments, hospices and self-catering holiday accommodation.
The government statement also indicates the change will apply to “small businesses who qualify for the domestic energy VAT relief and are not registered for VAT, as well as charities and residential care homes eligible for the reduced rate will also benefit”. Charities will qualify where they use electricity for a non-business purpose.
The main electricity suppliers will be on top of the changes but is some cases, e.g. non-business use by a charity, they do need to know how electricity is being used. There can also be supplies of electricity where a landlord invoices a tenant for metered electricity and there is a possibility the change will be overlooked.
Now is a good time to review the treatment of electricity and prepare for the changes if you are a customer or if you supply or recharge electricity.