What VAT do charities pay on energy?

The rates in plain terms

Use of the energy	VAT rate
Charitable non-business activity or qualifying residential use (gas)	5%
Same use, electricity in Great Britain, 1 Oct 2026 to 30 Jun 2027	0% (then back to 5%)
Business activity, such as a trading shop or paid hire	20%

Being a charity does not decide the rate by itself. The use does. HMRC's guidance says that if a charity makes no charge, its activities are generally non-business, and supplies for nominal consideration are normally treated the same way.

The 60% rule

If 60% or more of the energy at a site is for qualifying use, the whole supply gets the reduced rate. Below 60%, only the qualifying share does and the rest is at 20%.

Worked example (electricity, net of VAT £1,000, before the temporary 0%):

• 70% qualifying: the whole £1,000 at 5% = £50 VAT.
• 40% qualifying: £400 at 5% = £20, plus £600 at 20% = £120, total £140 VAT.

During the temporary 0% period the first case becomes £0 VAT, and the second becomes £0 on £400 plus £120 on £600 = £120 VAT.

Small amounts

Reduced rate also applies to small supplies: up to 1,000 kWh of electricity a month (33 kWh a day on average) or 4,397 kWh of gas a month (145 kWh a day), per premises. Our 33 kWh de minimis explainer shows how this works. It does not apply to EV charging.

How you claim it

You tell your supplier. For mixed use the supplier needs a signed declaration for each premises, from a responsible officer, giving the supplier and customer details, the VAT number if you have one, the premises address and the exact qualifying percentage. You must tell the supplier if the use changes. Suppliers have to make reasonable checks, and an incorrect certificate can lead to a penalty. See reduced-rate VAT declarations.

The temporary zero rate

The zero rate covers the same qualifying domestic and charity non-business electricity as the 5% relief, in Great Britain only. It does not apply to gas, or to business use, which stays at 20%. HMRC first announced an end date of 31 March 2027; Budget 2026 extended it, and HMRC VAT Notice 701/19 (updated 28 October 2026) now gives 30 June 2027. See zero-rate VAT on electricity.

Check your most recent bill shows the right rate for each premises. If you were overcharged, ask the supplier to correct it and credit you.

Climate Change Levy

Charities get a second break. GOV.UK guidance says energy a charity uses for non-business activities is excluded from the Climate Change Levy, while energy for its business activities, such as a charity shop selling donated goods, is not excluded unless the small-supply limits apply (under 1,000 kWh of electricity or 4,397 kWh of gas a month). The same 60% rule for mixed premises applies. Check the levy line on your bill matches your use.

Common problems

The usual issues are bills showing 20% on a supply that should be reduced, a declaration that was never sent after a change of supplier, and mixed-use buildings where nobody has worked out the percentage. When you switch supplier, you generally need to give the new one a fresh declaration, as the old one does not transfer. If you have been charged too much, ask for the bills to be corrected and any overpayment credited, and keep copies of your declaration and working.

Next steps

1. Work out the qualifying percentage for each building.
2. Send your supplier a signed declaration.
3. Read our charity energy guide.
4. Check church and care home examples.

Biz Energy is independent and not affiliated with any supplier, broker or comparison site, and takes no commission. This is general information, not legal, tax or financial advice.