0% VAT on Business Electricity FAQs
0% VAT on Electricity from 1 October 2026
From 1 October 2026, the VAT rate on qualifying electricity supplies will reduce from 5% to 0% for customers who already receive the reduced rate under current VAT rules.
No. Most non-domestic electricity supplies remain subject to the standard 20% VAT rate.
The new 0% VAT rate only applies to customers who already qualify for the reduced VAT treatment under existing VAT rules.
You may qualify if your electricity supply already receives the reduced VAT rate.
Examples of organisations that may qualify include:
Certain small businesses that meet HMRC eligibility criteria
Charities
Residential care homes
Eligibility rules themselves are not changing; only the VAT rate applied to qualifying supplies
If we already hold the correct information confirming your eligibility, no action is required.
The new VAT rate will be applied automatically to eligible supplies from 1 October 2026.
If you currently pay the standard 20% VAT rate, the change announced by the government will not affect your account unless you qualify for reduced-rate VAT under existing HMRC rules.
The 0% rate cannot be applied independently.
You must first qualify for reduced-rate VAT under existing HMRC rules. If you believe your organisation may qualify but is currently paying 20% VAT, please contact us as we will require you to complete a VAT declaration form before we can apply any kind of reduced VAT rate to your electricity account.
No, for now, the reduced VAT only applies to qualifying electricity supplies.
No. The new rate applies from 1 October 2026 and does not automatically apply retrospectively to electricity supplied before that date. You will see the reduced rate from your October bill.
If you believe you are being charged the wrong VAT rate, please contact us.
We will require you to complete a VAT declaration form and return this to us before we can apply any VAT reduction to your account.
If your account is already set up with the appropriate VAT status, no action is required.
If your circumstances have changed, or you believe your account has been set up incorrectly, please contact us so we can review your eligibility. You may be required to complete a VAT declaration form if you haven’t already done so.
Both. The 0% VAT reduction rate applies to everything that currently carries VAT on your electricity. That's both your unit rate and your standing charge.
As things stand, the rate is due to return to 5% from 1 April 2027, since this has been announced as an initial six-month measure. Whether it's extended or made permanent is a decision for government, not for us. We will, however, let you know if this continues.
Further information on eligibility for reduced-rate VAT can be found within HMRC guidance. Alternatively, our Business Customer Services team can help answer any questions about your account, you can call the team on 0345 230 6102 or email business@ecotricity.co.uk.