From 1 October 2026, Value Added Tax (VAT) will no longer be applied to household electricity bills. This change, announced in July 2026, is expected to save households an average of £45 annually.
The removal of VAT will apply to all household electricity bills, including those on fixed energy tariffs and pre-payment meters. Suppliers are expected to stop charging VAT on electricity bills from the specified date.
Small businesses, charities, and residential care homes that currently qualify for the reduced 5% VAT rate on electricity will also benefit from the 0% rate this winter. The VAT cut is funded for the 2026 to 2027 financial year through the cancellation of the digital ID programme.