WealthR Live › Electricity VAT: 0% to 31 March
Electricity VAT: 0% to 31 March confirmed
no VAT on electricity until 1 April
Where this stands
The zero rate of VAT on domestic electricity runs from 1 October 2026 to 31 March 2027, in place of the usual 5%. It is worth about £45 a year on a typical bill, and suppliers were expected to pass it on to everyone, including people on fixed tariffs. It covers Great Britain only — Northern Ireland stays at 5%, with comparable funding going to the NI Executive instead — and gas is unchanged at 5% everywhere. Two things follow that are easy to miss. The Ofgem cap's 4% rise already has this cut inside it, which is why Ofgem says the period cannot be compared directly with the one before: the underlying rise in what energy costs is larger than 4%. And when the zero rate ends on 31 March 2027, 5% returns to electricity bills, about £45 a year, five days before the new tax year begins. The Treasury said any longer-term action would be taken at the Budget.
What has happened, newest first
Every change we have recorded on this subject, with the date it landed. The most recent one is what the summary above is drawn from.
Two things landed together on 1 October. The energy price cap rose 4% to £1,723 a year for a typical direct-debit household, and VAT on domestic electricity dropped from 5% to zero. The second one pays for part of the first: the VAT cut is worth about £45 a year and it is already inside that 4%. Ofgem says so itself — this cap period cannot be compared directly with the last one — which means the underlying rise in what energy costs is bigger than the headline. It is gas doing the work: gas unit rates are up 8.7% while electricity is up 0.8% and its daily standing charge has actually fallen, from 57.19p to 54.83p. The VAT cut covers Great Britain only; Northern Ireland stays at 5% and its Executive receives comparable funding instead. The date that matters now is 31 March 2027, when the zero rate ends and 5% goes back on electricity, five days before the new tax year starts. Whether it is extended is a Budget question.
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WealthR Live is general information, not regulated financial advice. Figures for rumoured measures are illustrative and may not happen.