From 1 October 2026, the government is cutting VAT on domestic electricity from 5% to 0%, for an initial six-month period. We think that's a good thing — anything that takes cost off people's energy bills is worth doing, and we'll always say so. Here's what it means for you and your energy costs.

You’ve probably seen that Ofgem’s energy price cap is rising 4% from 1 October, driven by global fossil fuel insecurity and higher wholesale gas prices. At the same time, the Government is removing VAT from domestic electricity bills, bringing electricity costs down. The ’swings and roundabouts' of these two factors is a net rise of £60 a year for a typical household. Taking a typical bill from £1,663 to £1,723 a year.

Just electricity. Gas VAT isn't changing — it stays at 5%. If you're with us for both, you'll only see the difference on the electricity side of your bill. For what it's worth, we don't think that's right — gas bills need the same relief electricity is getting, and we'll keep saying so.

Both. The 0% rate applies to everything that currently carries VAT on your electricity — your unit rate and your standing charge. Some of the finer details are still being confirmed by the government but, for customers on our fixed tariffs, we also expect VAT will be removed from exit fees applied from 1 October 2026. This is still to be confirmed. If your exit fees are impacted we’ll let you know.

Yes. It applies to every domestic electricity tariff, including fixed ones. VAT is charged on top of your tariff rate rather than being part of it, so the cut applies regardless of what deal you're on. Even if your deal is about to end – your new tariff will still benefit from this VAT change, and you still won’t need to do anything.

As it stands – yes. When the government re-introduce VAT at 5% - whether that’s in April 2027 or further into the future – the price you pay will increase as well. If you’re on a Fixed Tariff, your unit rate is still fixed, the difference is that VAT will then be added again.

For any bill that covers usage either side of 1 October, you'll see it split into two VAT periods:

No. This is applied automatically to every domestic electricity tariff — there's nothing you need to request, switch, or sign up for.

The VAT cut itself is a genuine saving — on average it's estimated to save a typical household on the our Green Variable tariff in the region of £48 a year, though the actual amount depends entirely on how much electricity you use. But it's honest to say that some customers costs will still go up from 1 October – if that’s the case for you, we’ll have already written to you to let you know.

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 — but if it were up to us, we'd make it permanent, and extend it to cover gas and standing charges properly too. We'll update this page if anything changes.

You’ll benefit in the same way – your meter will be updated with the new 0% rates from 1 October. If you have a Traditional PAYG meter, make sure you top up as close to 1 October as possible so your meter updates quickly.

If your business already qualifies for reduced VAT (at 5% instead of 20%) on all or part of the electricity costs, then this will also be reduced to 0% (for the same eligible portion). This mostly applies to small businesses, charities and residential homes.

You can find HMRC's own guidance at Breathing space on your energy bill - GOV.UK.