The Government has announced a temporary reduction in VAT on certain electricity supplies, reducing the rate from 5% to 0% from 1 October 2026 for a period of six months.

Will this affect my organisation?

For most businesses, the answer is no.

Most commercial organisations pay the standard 20% VAT rate on their electricity, and this is not changing.

The temporary reduction is expected to benefit organisations that already qualify for the reduced 5% VAT rate, most notably charities using electricity for eligible non-business charitable activities.

What happens next?

If your organisation already qualifies for the reduced 5% VAT rate on eligible electricity supplies, the VAT applied to those qualifying supplies is expected to reduce to 0% from 1 October 2026 for six months. You won’t need to do anything because your energy supplier will invoice your energy at 0% VAT for that six-month period.

If you’re unsure whether your organisation qualifies for the reduced VAT rate, please get in touch with your Utility Aid account team. We’ll be happy to explain how the rules apply to your circumstances and help you understand whether any action is needed.

Andy Burnham ©House of Commons
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