HMO Electricity VAT 0%: Landlord Guide to March 2027

Last updated: Sunday 25 October 2026 (Europe/London).
Next update: if HMRC changes its guidance, and before the temporary zero rate is due to finish on 31 March 2027.
By: Switch Editorial Team, Switch Squid Ltd

Do HMO landlords pay VAT on electricity? As of 25 October 2026, electricity supplied to a landlord in Great Britain for tenants’ domestic use is charged at 0% VAT from 1 October 2026 to 31 March 2027, instead of the usual 5% reduced rate. The catch is that your supplier has to know the supply is for domestic use, which on a business contract usually means sending a VAT declaration; without one, many business supplies are billed at 20%. For a six-bed HMO using 9,000kWh a year, the VAT on the six months of electricity covered by the zero rate is roughly £345 at 20%, £86 at 5% and £0 at 0% (worked example below). Gas is not included and stays at 5% for qualifying domestic use, and Northern Ireland stays at 5% for electricity too. This SwitchSquid guide explains in plain English how HMRC’s rules apply to whole-house HMO supplies, bills-included rent and recharged electricity, with a checklist and a worked six-bedroom example. It is general information, not tax advice, so confirm your own position with your accountant. We may be paid if you use our business energy form; it doesn’t change the price you pay.

Sources: HMRC Revenue and Customs Brief 10 (2026), HMRC manual VFUP2340 and VAT Notice 701/19, checked on 25 October 2026.

What changed on 1 October 2026?

HMRC’s Revenue and Customs Brief 10 (2026), published on 8 September 2026, confirms a temporary zero rate of VAT for qualifying supplies of electricity in England, Scotland and Wales from 1 October 2026 to 31 March 2027. During those six months, electricity that would previously have been charged at the 5% reduced rate is charged at 0%.

Three points matter for landlords:

• What qualifies has not changed. HMRC says there are no changes to the supplies that qualify for relief. If your supply was correctly billed at 5% before October, it should now be at 0%. If it was billed at 20%, nothing in the new rule moves it to 0% on its own.

• Only electricity. HMRC says other fuel types are not affected, so gas for qualifying domestic use stays at 5%. Our HMO communal boiler gas contract guide covers the gas side.

• Great Britain only. Qualifying electricity in Northern Ireland stays at the 5% reduced rate.

For bills that span 1 October, HMRC lets suppliers split the VAT by when the energy was used and recommends using meter readings to do it, so an actual reading from late September or early October helps your first winter bill come out right.

Does an HMO count as domestic use for VAT?

In most cases, yes. HMRC’s internal manual VFUP2340 says the reduced rate applies not only to households but also to “supplies to landlords for eventual domestic use by their tenants”, as well as student accommodation and residential care homes. VAT Notice 701/19 lists houses, flats and other dwellings as residential accommodation, and says corridors, lifts, hallways and stairways in a residential unit are treated as part of the same unit.

HMRC also explains why: residents in this kind of property rarely get their own fuel bills, the landlord’s VAT usually relates to exempt supplies and cannot be recovered, and so the landlord is treated as the final consumer. In plain terms, the electricity your tenants use in their rooms, kitchen and bathrooms is domestic use, even though the contract is in your name.

There are two automatic routes as well. Notice 701/19 treats any electricity supply of no more than 1,000kWh a month (an average of 33kWh a day) at one set of premises as domestic, whatever the use. And where a supply is at least 60% for qualifying use, the whole supply is treated as qualifying; below 60%, it is split.

Three HMO set-ups and how the 0% rate applies

How your HMO is billed makes a difference. These are the three most common set-ups, in plain English:

1. One whole-house supply in your name, bills included in rent. This is the classic HMO. The electricity is used by tenants as their home, so it is domestic use. From 1 October it should be at 0% instead of 5%. Your tenants never see a VAT line, because energy is part of a single rent, but your own cost falls, because as a landlord you usually cannot reclaim the VAT you pay. Our HMO bills included guide explains how to set fair usage limits.

2. Room meters or sub-meters, with electricity recharged to tenants. The supply from the energy company to you is still for tenants’ domestic use, so the zero rate should apply to your bill. How you then recharge tenants is covered by Ofgem’s resale rules, which cap what you can charge; see our HMO sub-metering and recharging guide. If you are VAT-registered, ask your accountant how your recharge should be treated.

3. A separate landlord supply for communal areas only. Hallways, stairs, fire alarm panels and emergency lighting in a residential block are treated as part of the residential unit, so these supplies often qualify too. Notice 701/19 says recharges of common-area energy under a lease form part of the exempt service charge, and any VAT you pay is not recoverable. Our landlord communal electricity guide covers these supplies in detail.

Where it gets harder is mixed use, such as a shop or office on the same meter as the lettings. That is where the 60% test and apportionment come in, and where an accountant earns their fee.

Worked example: a six-bedroom HMO

To show what is at stake, we have used the example from our HMO energy costs per room guide: a six-bed HMO using 9,000kWh of electricity a year. At the government’s average price for the smallest business users, 38.36p per kWh for April to June 2026 (including standing charges and the Climate Change Levy, but not VAT), that is about £3,452 a year before VAT.

If roughly half of that electricity, 4,500kWh or about £1,726, is used between 1 October 2026 and 31 March 2027, the VAT on those six months looks like this:

These figures are an illustration, not a quote. Your split of winter and summer use will differ, and qualifying domestic use should not carry the Climate Change Levy either, which HMRC confirms in Notice 701/19, so your real bill could be a little lower again. The DESNZ price figures are from gas and electricity prices in the non-domestic sector.

What the numbers say: the temporary zero rate is worth having, but the bigger risk is being billed at 20% when the house should be treated as domestic. Getting the declaration right is worth about four times the zero-rate saving in this example.

VAT declaration checklist for HMO landlords

Suppliers decide the VAT rate from the information you give them. Notice 701/19 says a declaration should include the following, and most suppliers have their own form:

• The address of the premises the supply relates to, and the meter number (MPAN) for each supply.

• The amount of qualifying use as an exact percentage of total use, for example 100% for a house let entirely as homes.

• A signed statement from a responsible person, with their name, position and the date.

• Confirmation that you have read the guidance and will tell the supplier if the use changes.

Then check your bills:

1. Electricity lines from 1 October should show 0% VAT if the supply qualifies.

2. A bill spanning 1 October may be split between 5% and 0%; check the split matches your readings.

3. Gas lines should still show 5% for qualifying use, not 20%.

4. Climate Change Levy should not appear on qualifying domestic use.

5. Each property needs its own declaration if you have a portfolio.

If you have been billed at the wrong rate, ask your supplier how far back it can correct the VAT, and keep copies of every declaration you send. Our VAT on business energy guide covers corrections in more detail.

Is it different for care homes and supported living?

The same rules sit underneath. Homes providing care for the elderly or disabled are named in Notice 701/19 as residential accommodation, so their electricity also qualifies for the zero rate. Our care home VAT zero rate guide covers that sector, and the HMO landlords hub brings our landlord guides together.

What happens after 31 March 2027?

As the rules stand, the temporary zero rate is due to finish on 31 March 2027, and qualifying electricity would go back to 5%. The declaration you send now still matters after that date, because it is what keeps your supply at the reduced rate instead of 20%. If your business contract renews around then, a fresh quote is a good moment to confirm the supplier has your declaration on file.

Fit summary

• Good fit for a quick check: your HMO is on a business contract and your bills show 20% VAT, or no VAT declaration has ever been sent.

• Good fit for a new quote: your contract is out of term or renewing in the next few months, and you want the VAT set up correctly from day one.

• Talk to your accountant first: you have commercial units on the same meter, you are VAT-registered, or you recharge tenants for energy.

Got a question about your own property? Squid AI, SwitchSquid’s AI assistant, can talk you through what to gather before you ask for quotes.

Important conditions

• This guide is general information, not tax advice; confirm your position with your accountant or HMRC.

• The temporary zero rate applies to qualifying electricity in Great Britain from 1 October 2026 to 31 March 2027; Northern Ireland stays at 5%.

• Gas is not covered by the change; qualifying domestic gas stays at 5%.

• Your supplier needs the right information, usually a VAT declaration, to apply the domestic rate on a business contract.

• Business energy contracts have no price cap and no cooling-off period once agreed.

FAQ

Do HMO landlords get 0% VAT on electricity?

In Great Britain, electricity supplied to a landlord for tenants’ domestic use is charged at 0% VAT from 1 October 2026 to 31 March 2027. HMRC’s manual VFUP2340 confirms that supplies to landlords for tenants’ domestic use qualify for the reduced rate, which is now 0%. Your supplier must know the supply is for domestic use, usually through a VAT declaration.

Does the zero rate apply to gas in my HMO?

No. HMRC says the temporary change covers electricity only. Gas for qualifying domestic use stays at the 5% reduced rate.

My HMO is on a business contract. Will I still get the zero rate?

You can, if the supply is for qualifying use and your supplier has the right information. Many business supplies are billed at 20% by default, so send your supplier its VAT declaration form with the qualifying percentage. Check your next bill shows 0% on the electricity lines.

Can I reclaim the VAT on my HMO energy bills?

Usually not. Residential lettings are normally exempt from VAT, so landlords generally cannot recover the VAT they pay on energy. That is why getting the correct rate on the bill matters, and your accountant can confirm your own position.

Do communal hallways and stairs qualify?

Often, yes. VAT Notice 701/19 treats corridors, lifts, hallways and stairways in a residential unit as part of that unit. A separate landlord supply that serves only those areas in a residential building can therefore qualify for the reduced rate.

What is the 60% rule?

If at least 60% of a supply is for qualifying use, the whole supply is treated as qualifying. Below 60%, the supply is split between the reduced rate and the standard rate. This matters if your HMO shares a meter with a shop or office.

Does this apply in Northern Ireland?

No. HMRC says qualifying electricity in Northern Ireland stays at the 5% reduced rate. The zero rate applies only in England, Scotland and Wales.

Final decision card

If your HMO is let as homes, its electricity should be at 0% VAT until 31 March 2027, but only if your supplier knows it is for domestic use. Check your latest bill for the VAT rate, send a declaration if it shows 20%, and if your contract is due for renewal, ask for quotes that set up the VAT correctly from the start.