Farm business energy: electricity, tariffs and the farmhouse

Farm energy has a few features most other small businesses never meet: seasonal peaks, three-phase machinery, buildings spread across the holding, and a farmhouse that often runs off the same supply as the yard. This guide covers how farm electricity is billed, how to deal with the house-and-farm split, and where to look for savings.

What drives farm electricity use

It depends heavily on the type of farm. Typical big users include:

• Dairy: milking machines, vacuum pumps, milk cooling tanks and water heating. Usage is steady twice a day, every day.
• Poultry and pigs: ventilation, lighting and heating that run continuously.
• Arable and storage: grain driers, fans, conveyors and cold stores, with big seasonal peaks around harvest.
• Horticulture and glasshouses: lighting, heating, pumps and irrigation.
• General items: workshop tools, water pumps, yard lighting and offices.

Because use clusters in certain months, the annual total can hide expensive peaks. Look at your monthly pattern before agreeing a contract, and compare it with the shape of your quote.

Three-phase supply and capacity

Larger motors need a three-phase supply, and some farms are billed for the capacity they agreed to, measured in kVA, as well as for the energy they use. If you exceed that capacity you can be charged extra; see what happens if you exceed your agreed capacity. Remote farms on long rural lines may also pay higher network charges. A farm that has stopped a big activity may be paying for capacity it no longer needs; see supply capacity and kVA charges.

The farmhouse on the farm supply

This is the single most common farm energy question. Many farmhouses are fed from the farm's meter. Farming press has reported that a single meter can only be on one contract, so the whole supply is business, and splitting home and farm use means installing a separate meter. If the house already has its own meter, it is far easier to put it on a domestic contract. If it does not, ask your network operator what a new supply or meter would cost. Suppliers don't usually charge for the meter itself, but a new connection can involve a charge from the network operator.

Before deciding, compare the full annual cost of each option, including tax, not just the unit rate. A domestic supply carries 5% VAT and no Climate Change Levy, while the business supply carries 20% and the levy.

Worked example: VAT on a shared farm and house supply

Say the supply costs £12,000.00 before VAT and, by sub-meter or a fair estimate, 20% is the house. Under HMRC's fuel and power notice, if less than 60% is for qualifying domestic use, only that part gets the reduced rate.

• Farm share: £9,600.00 × 20% = £1,920.00.
• House share: £2,400.00 × 5% = £120.00.
• Total VAT £2,040.00, instead of £2,400.00 if all of it were charged at 20%.

From 1 October 2026 to 30 June 2027 (extended from 31 March 2027 at Budget 2026), the house share of electricity in Great Britain is temporarily zero-rated, so VAT on that share is £0.00 and the total drops to £1,920.00. The farm use stays at 20%.

The rule works the other way on a small holding where the house dominates. If £3,000.00 of electricity is 70% house, the 60% rule makes the whole supply reduced-rate: £3,000.00 × 5% = £150.00.

Your split must be reasonable and recorded. A sub-meter is the cleanest evidence. Tell your supplier, who may need a declaration; see the reduced-rate VAT declaration. If you are VAT-registered, the VAT you can reclaim is a separate matter to discuss with your accountant (see can I reclaim VAT on business energy).

Climate Change Levy and farms

The main levy rate is 0.801p/kWh from 1 April 2026 for both electricity and gas, rising to 0.827p/kWh from 1 April 2027. Farm use counts as business use, so the levy applies unless an exemption applies. Sectors such as pig and poultry farming and horticulture have had sector umbrella agreements under the Climate Change Agreements scheme, which gives a levy discount in return for efficiency targets. Eligibility and application windows change between scheme periods, so check whether your sector and site qualify now through your sector association or our CCA guide.

Generating your own: solar and anaerobic digestion

Farms have big roofs, and rooftop solar can cover a large part of daytime use. If you export surplus, you may be paid through the Smart Export Guarantee (see SEG for business and commercial solar panels). Solar works best when your demand is in the day, as with milk cooling or grain drying. Battery storage can help but adds cost; see business battery storage.

Contracts, suppliers and protections

Many farms qualify as microbusinesses, but the tests are separate for each fuel. A farm using under 100,000 kWh of electricity a year, or with fewer than ten employees and a turnover within €2 million, will usually be covered. Larger farms may count as small businesses (up to 200,000 kWh of electricity a year or fewer than 50 employees and turnover up to £6.5 million). A rural farm may also be off the gas grid and use oil or LPG, which are bought differently from mains gas; this guide covers mains gas and electricity only. See what is a microbusiness and business energy contracts.

Cutting farm electricity costs

1. Check the monthly profile and aim to move flexible loads (such as water heating) away from peak times if your tariff has day and night rates.
2. Maintain pumps, fans and milk cooling, and ask your dairy equipment supplier whether heat recovery or pre-cooling would suit your parlour.
3. Replace old lighting with LED in sheds and yards.
4. Service ventilation controls and fans, which can waste a lot when they run flat out.
5. Fix leaks and keep records so you can spot sudden jumps.

Holiday lets, cottages and other buildings

Farms often have more than one dwelling or a holiday let on the same supply. HMRC's fuel and power notice lists self-catering holiday accommodation as qualifying residential accommodation, so energy used in a self-catering let can count towards the domestic share, while hotels, inns and similar establishments are standard-rated. Check the notice, and record the let's use separately, ideally on its own meter. Tenant cottages are different again: if you bill the tenant for the electricity, you are reselling and should charge no more than you pay. Our landlord guide sets out the principles. It is cleaner to give each building its own meter and contract.

Next steps

1. List your meters and what each feeds, including the house and any cottages or holiday lets.
2. Decide whether to sub-meter or separate the house supply.
3. Check your contract end date and the kVA you are paying for.
4. Compare quotes using monthly figures; our cost calculator helps.