UK Electricity VAT Calculator
0% VAT from 1 October 2026
VAT on domestic electricity falls from 5% to 0% on 1 October 2026 — in Great Britain, on electricity only, and only to 31 March 2027 as funded. Work out what it saves on your own usage, and what your whole energy bill really pays once gas is counted.
Read the full answer — method, rates and figures
Quick answer: From 1 October 2026 VAT on domestic electricity in Great Britain falls from the 5% reduced rate to a 0% zero rate, announced by the UK Government on 21 July 2026 and worth around £45 a year off the Ofgem price cap for a typical household. Four qualifications are usually missed. (1) ELECTRICITY ONLY: domestic gas stays at 5%, so a dual-fuel household's blended VAT rate falls from 5% to roughly 2.5-2.7%, not to zero. (2) GREAT BRITAIN ONLY: Northern Ireland stays at 5% because EU VAT rules under the Windsor Framework do not permit a new zero rate; the NI Executive receives comparable funding instead. (3) TEMPORARY: Ofgem states the electricity cap rates exclude VAT from 1 October 2026 to 31 March 2027, which is 182 days, so the ~£45 annualised figure delivers roughly £23 as funded; extension is a matter for the 28 October 2026 Budget and is not announced. (4) The zero rate covers the standing charge as well as the unit rate, and extends to small businesses on domestic energy VAT relief, charities and residential care homes already eligible for the reduced rate.
Sources: GOV.UK news release 21 July 2026; Ofgem price cap 1 October to 31 December 2026.
✓ England, Scotland and Wales — the 0% rate applies from 1 October 2026
From your annual statement. 2,700 kWh is the usage that reproduces the Government's ~£45 figure at the October cap.
Ofgem publishes the October electricity rates VAT-free. A rate copied from a bill dated before 1 October 2026 includes 5%.
Not covered by the cut — set to 0 for an all-electric home, the only household that genuinely reaches 0% VAT on energy.
Saving, annualised
£45.54
£3.79 a month
1 Oct 2026 – 31 Mar 2027
£22.71
182 days as funded
VAT on your whole bill
2.59%
was 5.00% — gas is still charged
Your electricity bill, before and after 1 October 2026
- • Electricity before VAT: £910.77 — £710.64 of energy plus £200.13 of standing charge
- • At 5% VAT (to 30 September 2026): £956.31
- • At 0% VAT (from 1 October 2026): £910.77
- • Of the saving, £10.01 comes off the standing charge — you get that whatever your usage
- • Gas is not in scope and still carries £48.80 of VAT a year
- • Whole energy bill: £1,981.19 → £1,935.65, an effective VAT rate of 2.59%
Last reviewed 2 September 2026 by the Richify AI editorial team.
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From 1 October 2026 domestic electricity in Great Britain is zero-rated for VAT instead of carrying the 5% reduced rate. The saving is simply 5% of what your electricity costs before tax:
- Electricity only — unit rate and standing charge both fall out of VAT. Gas is untouched and stays at 5%.
- Great Britain only — Northern Ireland stays at 5% under Windsor Framework VAT rules; the NI Executive gets comparable funding instead.
- 182 days as funded — Ofgem bounds the VAT-free period at 1 October 2026 to 31 March 2027. Extension is a matter for the 28 October Budget.
- Automatic — no claim or application. Suppliers apply it, and the Government expects it passed through even on fixed tariffs.
One consequence worth being precise about: because gas is the larger half of a typical annual dual-fuel bill by value, the blended VAT rate across your whole energy bill does not go to zero. It falls from 5% to roughly 2.5–2.7%. This calculator shows that number rather than the headline.
Sources: GOV.UK news release, 21 July 2026; Ofgem, changes to the energy price cap between 1 October and 31 December 2026. Educational information, not advice.
What the electricity VAT cut saves at different usage levels
Computed at your own unit rate and standing charge. The annualised column is the figure quoted in the news; the right-hand column is what the measure delivers over the 182 days it is funded for.
| Annual electricity use | Bill (ex-VAT) | Saving / yr | 1 Oct – 31 Mar |
|---|---|---|---|
| 1,800 kWh | £674 | £33.69 | £16.80 |
| 2,700 kWh — typical | £911 | £45.54 | £22.71 |
| 3,600 kWh | £1,148 | £57.38 | £28.61 |
| 4,500 kWh | £1,385 | £69.23 | £34.52 |
| 6,000 kWh | £1,779 | £88.97 | £44.36 |
The saving is linear in usage because VAT is a flat percentage — there is no threshold and no taper. Around £10 of it is the standing charge, which every household pays regardless of use.
Is VAT being scrapped on gas too?
No — and this is the detail most coverage loses. The zero rate covers domestic electricity only. Gas stays at the 5% reduced rate, and Ofgem publishes its October–December 2026 gas figures — 7.97p/kWh and a 29.68p/day standing charge — inclusive of that 5%. On the inputs above, gas still carries £48.80 of VAT a year.
So the honest headline for a dual-fuel household is not "0% VAT on energy". Across the whole bill the effective rate falls from 5.00% to 2.59%. An all-electric home — heat pump, electric heating, no gas connection — is the household that genuinely reaches 0%, and it is also the one that saves most in absolute terms, because its entire energy bill is in scope.
Why the "£45 a year" figure overstates what you receive
The ~£45 quoted by the Government is an annualised rate: it is what a typical household would save if the zero rate ran for a full twelve months. As announced and funded it does not. GOV.UK describes the measure as funded for the 2026-27 financial year, and Ofgem states the electricity rates exclude VAT from 1 October 2026 to 31 March 2027 — 182 days.
On your inputs that is £45.54 annualised but £22.71 actually delivered, unless the zero rate is extended. Whether it is extended is a decision for the Autumn Budget on 28 October 2026, and nothing has been announced. Treat any saving beyond 31 March 2027 as unannounced rather than expected.
That pattern — a real, dated, confirmed change whose value depends on a threshold or an end date nobody has legislated past — is the same one that governs frozen tax thresholds. Our fiscal drag calculator does the equivalent arithmetic on income tax and inheritance tax to April 2031.
VAT on domestic electricity: the rate history
| From | Domestic electricity | Domestic gas |
|---|---|---|
| Before April 1994 | 0% | 0% |
| April 1994 | 8% | 8% |
| September 1997 | 5% | 5% |
| 1 October 2026 (GB) | 0% | 5% |
| 1 October 2026 (NI) | 5% | 5% |
October 2026 is the first time in nearly thirty years that the two domestic fuels carry different VAT rates, and the first time any part of the UK has differed from the rest on domestic fuel VAT.
How to use this calculator
- Choose your region. The zero rate applies in Great Britain only — if you are in Northern Ireland, domestic electricity stays at 5% and your saving from this measure is nil.
- Enter your annual electricity use in kWh. Take it from a recent bill or your annual statement; the default of 2,700 kWh is the usage that reproduces the Government's headline ~£45 figure at the October cap rates.
- Check the unit rate and standing charge. They default to Ofgem's October–December 2026 cap for a direct-debit customer. If you are copying rates off an older bill, switch the rate basis to 'includes 5% VAT' so the calculator strips the VAT out before working.
- Add your gas use to see the blended picture. Gas is not covered by the cut, so this is what turns a headline '0% VAT on energy' into the real effective rate you will pay across the whole bill.
- Read two numbers, not one: the annualised saving (the figure quoted in the news) and the 1 Oct 2026 – 31 Mar 2027 saving, which is what the measure actually delivers as currently funded.
❓ Frequently Asked Questions
When does 0% VAT on electricity start in the UK?
1 October 2026. The Government announced on 21 July 2026 that VAT on domestic electricity would be cut from the 5% reduced rate to a 0% zero rate, taking effect from 1 October 2026 — the same day Ofgem's October–December price cap begins.
Ofgem's published cap rates for that period already reflect it: the electricity unit rate of 26.32p/kWh and standing charge of 54.83p/day are stated as not including VAT from 1 October 2026 to 31 March 2027. You do not need to apply or claim; suppliers apply the zero rate to domestic supplies automatically, and the Government has said it expects all suppliers to pass the reduction on to every customer, including those on fixed tariffs.
Does the 0% VAT cut apply to gas as well as electricity?
No. This is the single most common error in coverage of the measure, which is usually reported as VAT being scrapped on 'energy bills'. The zero rate applies to domestic ELECTRICITY only.
Domestic gas stays at the 5% reduced rate, and Ofgem's gas cap figures for October–December 2026 (7.97p/kWh and a 29.68p/day standing charge) are published including that 5%. For a dual-fuel household the practical effect is that the blended VAT rate across the whole energy bill does not fall to zero — it falls from 5% to roughly 2.5–2.7%, because rather more than half of a typical annual energy bill by value is gas.
This calculator shows that blended rate explicitly so the saving is not overstated.
Does 0% VAT on electricity apply in Northern Ireland?
No. The zero rate applies in Great Britain — England, Scotland and Wales. Northern Ireland remains subject to EU VAT rules under the Windsor Framework, which do not permit a new zero rate to be introduced, so domestic electricity in Northern Ireland stays at the 5% reduced rate.
The Government's stated response is fiscal rather than tax-based: the Northern Ireland Executive receives comparable funding to enable it to support NI households. If you are in Northern Ireland, set the region switch on this calculator to Northern Ireland — your VAT saving from this measure is nil, and any support instead depends on what the NI Executive does with that funding.
How long does the 0% electricity VAT rate last?
It is temporary as announced. GOV.UK says the measure is funded for the 2026-27 financial year, and Ofgem's price cap wording bounds it precisely: the electricity rates exclude VAT 'from 1 October 2026 to 31 March 2027'.
That is 182 days, not a full year. Any extension is a decision for the Autumn Budget on 28 October 2026 and has not been announced.
This matters for how you read the headline figure: the widely-reported saving of around £45 is an annualised rate, so a typical household on the cap actually receives roughly £23 across the six-month window as currently funded. Treat anything beyond 31 March 2027 as unannounced rather than expected.
How much will the electricity VAT cut save me?
The saving is 5% of your electricity bill excluding VAT, so it scales directly with how much electricity you use. The Government's figure is around £45 off the yearly Ofgem price cap.
That is reproducible: at the October cap rates, a household using about 2,700 kWh a year pays roughly £911 for electricity before VAT (2,700 × 26.32p, plus 365 days of the 54.83p standing charge), and 5% of that is about £45.54. A low-use household at 1,800 kWh saves closer to £34; a high-use or all-electric household at 4,500 kWh saves about £69.
Because the standing charge is also within scope, even a very low-consumption household saves about £10 a year on the standing charge alone. Enter your own annual kWh from a recent bill or annual statement for a figure specific to you.
Do businesses and charities get 0% VAT on electricity?
Some do, through the existing domestic-rate relief rather than as a new business measure. Small businesses that qualify for domestic energy VAT relief and are not registered for VAT, together with charities and residential care homes already eligible for the 5% reduced rate, move to 0% on their electricity from 1 October 2026.
Eligibility runs through the existing VAT certificate and declaration process — the usual route is the de minimis threshold or a qualifying-use declaration where at least 60% of the supply is for a qualifying purpose. A VAT-registered business paying the standard 20% rate on electricity is not affected and continues to recover input VAT in the normal way, so the measure is neutral for it.
If you already hold a certificate for the reduced rate you should not need to do anything new.
Will my supplier pass the VAT cut on if I am on a fixed tariff?
The Government has said it expects all suppliers to pass the VAT reduction on to all customers, including those on fixed tariffs, as they did with the £150 of costs taken off bills announced at the previous Budget. VAT is a tax charged on top of the supply rather than part of a supplier's own pricing, so a fixed contract fixes the unit rate and standing charge, not the tax applied to them — the mechanics point the same way as the expectation.
It is still worth checking your first bill dated on or after 1 October 2026: the VAT line on a domestic electricity account should read 0.00, and it is the electricity account you need to look at, because the gas VAT line should still show 5%.
What is the VAT rate on domestic electricity in the UK historically?
Domestic fuel and power was zero-rated until 1994, when VAT was introduced on it at 8%. The rate was due to rise to 17.5% in 1995 but the increase was defeated in the Commons, and in September 1997 it was cut to 5%, where it stayed for both electricity and gas for nearly three decades.
From 1 October 2026 domestic electricity in Great Britain moves to 0% while gas remains at 5% — the first time the two fuels have carried different VAT rates in that period. This is also why the change is administratively straightforward for suppliers: the reduced-rate machinery, including the qualifying-use declarations for charities and small businesses, already exists and the zero rate is applied through it.
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Further Reading
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