Does zero VAT on electricity apply to my business?
Generally no. The temporary 0% VAT on electricity in Great Britain, from 1 October 2026 to 30 June 2027, covers only domestic and charity non-business use. Ordinary business electricity stays at the 20% standard rate.
What the zero rate is
HMRC introduced a temporary zero rate of VAT for qualifying electricity in Great Britain from 1 October 2026. It was first announced to end on 31 March 2027, but Budget 2026 extended it, and HMRC VAT Notice 701/19: fuel and power (updated 28 October 2026) now gives 30 June 2027 as the end date, after which the rate reverts to 5%. Northern Ireland stays at 5% and gas is not affected. The original rules were set out in HMRC Revenue and Customs Brief 10 (2026).
Who gets it
The zero rate has the same eligibility as the existing 5% relief:
- domestic use;
- charity non-business use;
- small supplies within the de minimis limit (1,000 kWh a month, about 33 kWh a day), as before.
Who does not
- A shop, office, pub or workshop using electricity above the de minimis limit for business: still 20%.
- The business part of a mixed-use supply.
Worked examples
| Case | Monthly net bill | VAT before | VAT during zero-rate period |
|---|---|---|---|
| Office, 3,000 kWh, all business | £750 (at 25p) | £150 (20%) | £150 |
| Tiny studio, 800 kWh a month, under 1,000 kWh a month | £224 (at 28p) | £11.20 (5%) | £0 |
| Mixed: 45% charity non-business, £400 net | £400 | £53 | £44 (on the 55% business part: £220 × 20%) |
Check on the third row: before, £180 × 5% = £9 plus £220 × 20% = £44, total £53. During the zero-rate period, the £180 is 0% and the £220 still carries £44.
Do you need to do anything?
If you already have a reduced-rate arrangement, your supplier should apply the change. If you believe you qualify but are charged 20%, send a declaration: see the reduced-rate VAT declaration and our overview zero-rate VAT on electricity for businesses.
If you read older guidance that gives 31 March 2027 as the end date, it predates the Budget 2026 extension. The current end date in HMRC's fuel and power notice is 30 June 2027.
Who this helps among business-type customers
The gain goes mainly to organisations that already had a reduced-rate arrangement: a very low-use unit, a charity building used for non-business purposes, or a property with a home and workspace mixed together. Anyone trading from standard-rated premises at normal commercial volumes sees no change to the VAT percentage.
After 30 June 2027
Qualifying electricity reverts to the 5% rate, so budget for that if you are one of the eligible customers. Business use remains at 20% throughout.
Mixed-use premises: the 60% rule still applies
If part of your supply is for qualifying use and part for business, the usual 60% rule decides the split. If 60% or more of the electricity is for qualifying use, the whole supply is treated as qualifying and, during the zero-rate period, carries 0%. Below 60%, only the qualifying share is zero-rated and the rest is charged at 20%. In the third row of the table, the charity share is 45%, which is under 60%, so the split applies. If it rose to 60%, all £400 would be zero-rated and the VAT would fall from £44 to £0.
Questions to ask your supplier
- Is my premises recorded as domestic, charity non-business, or mixed?
- What percentage do you apply, and when was my declaration last updated?
- Will the VAT line on my bill show 0% from October 2026?
Next steps
- Check your VAT line against your use pattern.
- If you qualify, send a declaration.
- Run your numbers in the VAT and CCL calculator.
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.