VAT on household electricity cut to 0% from October 2026
The government is cutting VAT on domestic electricity from 5% to 0% from 1 October 2026, taking about 45 pounds a year off a typical bill via the Ofgem price cap.
VAT on domestic electricity falls from 5% to 0% on 1 October 2026, worth about £45 a year off the Ofgem price cap for a typical household. Gas VAT is unchanged at 5%.
- Effective from
- 1 October 2026
- Who it affects
- All UK households, plus small businesses, charities and care homes on domestic energy rates
The government has announced that VAT on domestic electricity will be cut from 5% to 0% from 1 October 2026, as a cost-of-living measure.
What changed
Domestic energy has been charged the reduced 5% rate of VAT. From 1 October 2026, the rate on household electricity drops to 0%. The cut is expected to take around £45 a year off the Ofgem price cap for a typical household, on top of a previously announced £150 reduction.
The measure applies to all UK households, and also to small businesses that qualify for domestic-energy VAT relief (those not registered for VAT), charities and residential care homes on the reduced rate. Northern Ireland households benefit through comparable funding to the NI Executive.
Important: electricity only, not gas
The cut is to VAT on electricity. VAT on domestic gas remains at 5%, so households that heat with gas keep paying the reduced rate on that part of their energy bill.
The wider numbers
The government estimates the cut costs around £850 million in 2026/27, funded by cancelling the £1.8 billion Digital ID programme. It is expected to reduce CPI inflation by about 0.10 percentage points and RPI by around 0.14 percentage points.
What to do
There is nothing to claim - the change is applied automatically to your electricity bill by your supplier from 1 October 2026, and will be reflected in the Ofgem price cap from that date. If you want to see how energy and other costs fit into your budget, the cost of living money-saving guide and the VAT calculator can help.