Legislation has been enacted to deliver the government’s commitment to reduce the VAT rate on domestic electricity bills from 5% to 0% for the period 1 October 2026 to 31 March 2027. The measure, announced in the Spring Statement 2026, received Royal Assent on 15 September 2026. Energy suppliers must update their billing systems to apply the zero rate to all domestic electricity supplies within the period, including standing charges. The zero rate does not apply to business electricity supplies or to gas.
Key Takeaways
- Mandatory Zero-Rating: Suppliers must apply 0% VAT to all domestic electricity consumption from 1 October 2026; they cannot opt to charge 5%.
- System Updates Required: Billing systems must be configured to distinguish domestic from non-domestic supplies and to apply the time-limited zero rate automatically.
- Interaction with Energy Price Guarantee: The VAT cut operates alongside the Energy Price Guarantee, further reducing household bills during the winter months.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement