The 0% VAT cut on electricity explained
VAT on domestic electricity drops from 5% to 0% for six months from 1 October. Who gets it, what it is worth and what comes next
From 1 October 2026 to 31 March 2027, domestic electricity in England, Scotland and Wales carries no VAT instead of the usual 5%. It is worth about £45 a year on a typical bill and applies whether you are on the price cap or a fixed deal. This guide sets out who benefits, how it shows on your bill, and why the saving may disappear in April.
What is changing
Domestic energy normally carries VAT at a reduced rate of 5%. For six months the electricity rate drops to 0%. Gas is unchanged at 5%. The measure is temporary and time-limited.
The cut is already reflected in Ofgem's October cap of £1,723. Without it, the cap would have been higher. In practice the cut has offset most of what would otherwise have been a small electricity rise, leaving electricity unit rates roughly flat while gas rises about 8%.
How much you actually save
The £45 figure assumes typical electricity use. The more electricity you use, the bigger your saving. Households that heat with electricity, run a heat pump, or charge an electric vehicle at home will see more than £45 across the six months. Households that heat with gas and use little electricity will see less.
| Your electricity use | Rough effect of 0% VAT |
|---|---|
| Low (small flat, gas heating) | Under £45 a year equivalent |
| Typical | About £45 a year equivalent |
| High (electric heating, EV, heat pump) | Well above £45 a year equivalent |
Remember the cut runs for six months, so the cash you keep between October and March is roughly half the annual figure, unless your usage is heavily winter-weighted, in which case it is more.
Fixed tariffs get it too
If you are on a fixed deal, your supplier must pass the VAT cut on. Your unit rate and standing charge for electricity should show 0% VAT for the period. You do not need to ask, switch or do anything. Check your first bill after 1 October to confirm it has been applied, and query it with your supplier if not.
Northern Ireland
VAT is a UK-wide tax, but energy in Northern Ireland is regulated separately. Rather than cutting the rate there, the government is providing Northern Ireland with equivalent funding. How that reaches households is a matter for the Northern Ireland Executive, so check announcements there if you live in NI.
What happens after March 2027
The cut ends on 31 March 2027 unless it is extended. Whether it continues will be decided at the Autumn Budget. If it lapses, electricity bills rise by the VAT amount from April, on top of whatever the April to June cap does. Budget for that possibility rather than assuming the lower price is permanent.
What to do next
- Check your first post-October bill to confirm 0% VAT on electricity, whatever tariff you are on.
- If you are considering a shift towards electric heating or an EV, note that the cut makes the sums slightly better for six months, but do not base a long-term decision on a temporary tax change.
- Put a reminder in your diary for the Autumn Budget to learn whether the cut continues.
- The cut does nothing for gas, which is where this winter's rise sits. Gas-heavy households should focus on the thermostat and draught-proofing.
Official detail on VAT rates is at gov.uk. Cap levels are published by Ofgem.