Can a small business use a domestic energy supplier?
Generally no. Premises used for business need a business energy contract, even if the supplier also sells to households. A home-based business may be an exception depending on how the meter is used, so check with your supplier.
The short rule
Domestic tariffs are written for homes. If a meter supplies premises used for a business, that supply is normally a non-domestic one and belongs on a business contract. Ofgem's switching guidance says a business run from home could be on either a domestic or a business contract, so you should check with your supplier, but it also says that a microbusiness run from home needs a business energy contract (Ofgem: switch energy supplier).
The Ofgem household price cap does not apply to business contracts. If you are on a household tariff by mistake, you may also be on the wrong VAT treatment and the wrong terms.
Home-based businesses
Many people run a business from a spare room. The picture depends on what the supply is used for:
| Situation | Usual position |
|---|---|
| Laptop and occasional work in a spare room, home meter | Can be either; Ofgem says a microbusiness run from home needs a business contract, so ask your supplier; see working from home |
| Dedicated workshop, studio or salon separately metered | Business contract |
| Customers visit, equipment running most of the day | Business contract is the safer route |
The line is not something we can draw for you. Ask your current supplier in writing how it classifies your supply, and keep its reply.
Why it matters
- Terms. Domestic tariffs and business contracts carry different protections. Households have the price cap and household switching guarantees; business contracts have their own rules, such as Principal Terms, microbusiness rollover limits and the 12-month back-billing limit for microbusinesses. See business vs domestic energy.
- Tax. A business supply is charged at the standard 20% VAT rate unless it qualifies for relief, and the Climate Change Levy can apply. Domestic supplies get a reduced rate: 5%, or 0% for electricity in Great Britain from 1 October 2026 to 30 June 2027 (HMRC first set the end as 31 March 2027; Budget 2026 extended it). Using a household tariff for business use does not make the business use eligible for that rate (HMRC VAT Notice 701/19: fuel and power).
- Risk. If a supplier finds substantial business use on a domestic account, expect it to ask you to move to a business contract, and the VAT already charged may need correcting.
Worked example
A hairdresser sees a salon unit with a household tariff left by the previous occupant. Suppose she uses 12,000 kWh a year at 28p/kWh: 12,000 × £0.28 = £3,360. VAT at 20% adds £672, giving £4,032. Had it been wrongly billed at the domestic electricity rate, which is 0% in Great Britain until 30 June 2027, she would be underpaying the full £672 of VAT, which could later be corrected. She should register the premises for business supply. See moving premises and deemed contracts.
What if there is a mix?
Where one meter serves both a home and business (a flat above a shop), the supplier and HMRC rules on mixed use apply; the reduced VAT rate can apply if at least 60% of use is domestic. See which VAT rate applies.
Next steps
- Check your account type on your latest bill.
- Ask your supplier to confirm in writing how your premises are classed.
- If it is business use, compare business tariffs through our comparison guide.
Sources
General information only. Energy prices, rules and supplier terms change; check the latest position with your supplier, Ofgem or the Energy Ombudsman before you act.