From 1 October 2026 VAT on business electricity will be reduced from 5% to 0% for eligible business customers. Most businesses on the standard VAT rate will not see any change to their arrangement. The reduction applies mainly to two groups.
The first group is businesses with low electricity usage. As a general guide if your average daily consumption is less than around 33kWh you may qualify. This can apply to independent retailers small offices and small professional services firms.
The second group is organisations that qualify because of their status or premises type. This can include certain charities and non profit organisations along with some residential and mixed use properties.
What this means for your bill depends on your eligibility and your usage. VAT is only one part of your overall electricity cost. Consumption wholesale prices non energy costs and your contract type all play a part too so it is worth reviewing your full energy arrangement rather than looking at VAT in isolation.
If you already receive reduced rate VAT you do not need to do anything. The new rate will be applied automatically from 1 October if you are eligible.
If you are not sure whether you qualify here is what to do. Check your bill to see your average daily consumption. Make sure a VAT declaration form has been completed and submitted. Contact your energy supplier or broker if you are unsure about your eligibility or what information is needed.
At Intelligent Gas and Power we can check your eligibility for you as part of a wider review of your contract and usage. Get in touch on 01670 333330 or help@intelligentgas.co.uk.