26 August 2026
Electricity VAT Cut October 2026: What You Actually Save
Domestic electricity VAT in Great Britain is 0% from 1 October 2026 to 31 March 2027. See the bill saving and why Northern Ireland remains at 5%.
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Quick answer
VAT on domestic electricity in Great Britain is 0% from 1 October 2026 and is due to run until 31 March 2027. Northern Ireland domestic electricity remains at 5%. Confirming the October price cap on 26 August, Ofgem said the cap would have been around £45 higher without it. The saving is already included in the confirmed cap figure, so it is not an additional discount. It applies to electricity only, not gas, and it reaches households on fixed tariffs as well as standard variable ones.
VAT on domestic electricity in Great Britain (England, Scotland and Wales) fell from 5% to 0% on 1 October 2026. Northern Ireland remains at 5% VAT. The government announced the cut on 21 July 2026. Confirming the October cap on 26 August, Ofgem said that without it the cap would have been around £45 higher. It runs until 31 March 2027.
Two things about it are widely misunderstood. It is already priced into the October cap, so it is not an extra saving on top. And unlike a cap change, it reaches households on fixed tariffs as well.
| Key facts |
|---|
| Domestic electricity VAT in Great Britain: 5% to 0% |
| Starts: 1 October 2026 |
| Currently ends: 31 March 2027 |
| Effect on the annual cap: about £45, per Ofgem |
| Applies to: electricity only, not gas |
| Reaches fixed tariffs: yes |
| Announced: 21 July 2026 |
Quick answer
- The cut is already inside the October price cap figure. Do not subtract £45 from the headline again.
- It applies to electricity in Great Britain only. Northern Ireland electricity and domestic gas remain at 5% VAT.
- Fixed-tariff households benefit too, which is unusual for an energy policy change.
- It is temporary and currently ends on 31 March 2027.
Jump to
- What is changing, and when
- How much will you actually save?
- It is already in the October price cap
- Fixed tariffs benefit too
- Electricity only, so gas homes save less
- What happens on 1 April 2027
- How to check your supplier passed it on
What is changing, and when
Domestic energy has been taxed at a reduced VAT rate of 5% for many years. From 1 October 2026, the rate on domestic electricity in Great Britain drops to 0%. Gas is not included and stays at 5%. HMRC’s fuel and power guidance confirms that Northern Ireland electricity remains at 5%.
The measure was announced on 21 July 2026 as a cost-of-living step ahead of winter. The Treasury estimates it costs around £850 million in 2026-27, funded by cancelling the planned Digital ID programme. It is set to run to 31 March 2027, the end of the financial year, with the end date currently scheduled for 31 March 2027.
The government has said it expects suppliers to pass the full saving to customers.
How much will you actually save?
Ofgem puts it at about £45 a year. Our own calculation from the confirmed October rates lands in the same place, and shows how much it moves with usage.
The October electricity rates are set at 0% VAT. Adding 5% back shows what the same electricity would have cost under the old rate, which is the saving.
Using the confirmed October electricity rates of 26.32 p/kWh and a 54.83 p/day standing charge:
These are annualised illustrations using October rates, not a promised saving during the six-month VAT window. Actual savings depend on electricity supplied during that window and the rates charged.
| Household | Annualised electricity cost | Annualised illustration of 5% VAT |
|---|---|---|
| 2,500 kWh (Ofgem's current typical use) | £858 | about £43 |
| 2,700 kWh (previous typical use) | £911 | about £46 |
| 5,000 kWh (electric heating, heat pump or EV) | £1,516 | about £76 |
The pattern matters more than the exact figure. The saving scales with how much electricity you use. A high-electricity household saves substantially more than the headline, and a low-electricity household saves less.
To see the number for your own usage rather than a typical household, upload your bill to Taupia. It reads your actual kWh rather than assuming an average home.
It is already in the October price cap
This is the single most common error we expect to see repeated.
Ofgem sets the cap using the VAT rate that will apply during the cap period. Because the zero rate starts on 1 October, the same day the new cap starts, the October price cap is already roughly £45 lower than it would otherwise have been. Ofgem said so explicitly when it confirmed the cap at £1,935 on the like-for-like basis, or £1,723 on its own.
So the cut is not a discount applied on top of the announced figure. It is one of the reasons the announced figure is not higher. If you subtract £45 from the headline cap, you will be double counting.
Fixed tariffs benefit too
Most price cap news is irrelevant if you are on a fixed deal. Your unit rates are contractually fixed, so a cap change does not move them.
VAT is different. It is a tax on the electricity you buy, not a term of your tariff. In Great Britain, the rate applies whatever deal you are on, and the government expects suppliers to pass the reduction through to fixed-tariff customers as well.
If you are on a fix, this is the rare energy announcement that should show up on your bill without you doing anything.
Electricity only, so gas homes save less
The cut covers electricity in Great Britain only. Domestic electricity in Northern Ireland and domestic gas remain at 5% VAT.
That produces an uneven outcome. A home heated by gas spends a large share of its energy budget on the fuel that did not change, so it sees a smaller proportional benefit. A home with electric heating, a heat pump, or an electric vehicle sees a larger one.
Ofgem's own confirmation makes the split stark. Gas bills rise about 8% in October, but households that do not use gas see less than 1%, because electricity stays broadly stable and Ofgem credits the VAT cut for that. The electricity standing charge also falls, from 57.19p to 54.83p a day.
If you heat with gas, the VAT cut offsets only a small part of your increase. If you are all-electric, it is most of the reason your bill barely moves.
What happens on 1 April 2027
The zero rate is currently legislated to end on 31 March 2027. Unless it is extended, VAT on domestic electricity in Great Britain returns to 5% on 1 April 2027, which would add back roughly what it took off.
This matters if you are choosing a fixed deal now:
- Ask what VAT rate a quoted annual cost assumes, and for which months.
- A fix running past April 2027 spans both VAT regimes, so a single quoted annual figure may flatter the later part of the term.
- Do not treat the current saving as permanent when comparing a two-year fix against a one-year one.
Check the government’s published policy before assuming an extension.
How to check your supplier passed it on
From your first bill covering October onward:
- Find the VAT line on your electricity bill or statement. For domestic electricity supplied in Great Britain between 1 October 2026 and 31 March 2027, it should show 0% or £0.00.
- Check that gas still shows 5%. That is correct, not an error.
- If you pay a fixed monthly Direct Debit, the saving may show as a slower-growing balance rather than a lower payment. Ask for a review if your payment does not reflect it.
- If your Great Britain bill shows 5% VAT on domestic electricity supplied during that window, ask your supplier to explain and correct it if needed. In Northern Ireland, 5% remains the correct domestic electricity rate.
For the confirmed cap figures the VAT cut is already built into, see our October 2026 price cap breakdown and the UK energy price cap guide.
If your landlord charges for electricity
If you pay an energy supplier directly, check its electricity VAT line for the relevant supply dates. If the landlord separately resells electricity, ask for the underlying bill and how the recharge was calculated; use the resale guidance for your nation. Citizens Advice’s linked landlord charging guidance covers England.
If energy is included in rent, do not assume the temporary VAT change reduces rent by the same amount. Check the tenancy terms, included services and any fair-usage limit. A supplier bill, separate resale charge and inclusive rent are different arrangements. In Northern Ireland, domestic electricity remains at 5% VAT; use the Consumer Council’s energy advice for supplier billing issues.
Key takeaways
- Domestic electricity VAT is 0% in Great Britain from 1 October 2026 to 31 March 2027. Northern Ireland remains at 5%.
- Ofgem says the October price cap would have been about £45 higher without it. The saving is already inside the headline figure.
- Annualised illustrations at October rates are roughly £43 at 2,500 kWh and £76 at 5,000 kWh; actual savings over the six-month VAT window depend on usage and rates.
- It is why gas bills rise about 8% in October while homes with no gas see less than 1%.
- Fixed-tariff households in Great Britain benefit too, unlike with a normal cap change.
Frequently asked questions
When does the VAT cut on electricity start?
Domestic electricity VAT in Great Britain is 0% from 1 October 2026 to 31 March 2027. Northern Ireland domestic electricity remains at 5%.
Does the electricity VAT cut apply in Northern Ireland?
No. HMRC confirms that qualifying domestic electricity supplies in Northern Ireland remain at 5% VAT. A Northern Ireland bill showing 5% is not incorrect solely because Great Britain has a temporary zero rate.
How much will the electricity VAT cut save me?
For domestic electricity in Great Britain, the saving is the 5% VAT that would otherwise be charged on pre-tax electricity costs during the zero-rate window. At October rates, £43 at 2,500 kWh or £76 at 5,000 kWh are annualised illustrations, not promised savings over the six-month window. Actual savings depend on usage and rates during the relevant dates.
Is the VAT cut included in the October 2026 price cap?
Yes. Ofgem sets the cap using the VAT rate that applies during the cap period, and the zero rate starts on 1 October, the same day the cap does. Confirming the cap on 26 August, Ofgem said it would have been around £45 higher without the VAT change. Subtracting £45 from the headline figure would double count the saving.
Does the VAT cut apply to fixed energy tariffs?
Yes, in Great Britain. VAT is a tax on the electricity you buy rather than a term of your tariff, so it applies whatever deal you are on. The government has said it expects suppliers to pass the full saving on, including to fixed-tariff customers. This is unusual, because a normal price cap change does not affect fixed deals at all.
Does the VAT cut apply to gas?
No. The cut covers domestic electricity in Great Britain only. Gas remains at 5% VAT. That means homes heated by gas see a smaller proportional benefit than homes with electric heating or a heat pump.
What happens to electricity VAT in April 2027?
The Great Britain zero rate is currently due to end on 31 March 2027, so VAT would return to 5% on 1 April 2027 unless it is extended. If you are choosing a fixed deal that runs past that date, ask what VAT rate the quoted annual cost assumes and for which months.
Will bills-included rent fall by the VAT saving?
Not automatically. Direct supply, separately resold electricity and inclusive rent are different arrangements. Check the underlying charges and tenancy terms, and use advice for your nation.