Electricity VAT Cut to 0% 2026: What It Saves You

Last updated: Thursday 29 October 2026 (Europe/London).
Next update: when Ofgem publishes the January to March 2027 price cap (due by 25 November 2026) or HMRC changes the temporary electricity VAT rate.
By: Switch Editorial Team, Switch Squid Ltd

As of 12 October 2026, household electricity in Great Britain carries 0% VAT from 1 October 2026 to 30 June 2027 (extended at the Budget, GOV.UK says), while gas stays at 5%. Ofgem’s price cap for a typical dual-fuel home paying by Direct Debit is £1,723 a year from 1 October to 31 December 2026. This guide explains what the VAT cut changes on your bill, what it doesn’t, and why forecasts of around £2,121 for January to March 2027 are not official figures.

This guide is for households in Great Britain checking whether to stay on the price cap or compare tariffs this winter. SwitchSquid compares prices; we don’t sell energy. The buttons below open MoneySuperMarket’s home energy comparison, and we may earn a commission if you switch through them. It doesn’t change your price.

Offer facts (checked 12 October 2026)

• VAT on household electricity (Great Britain): 0% from 1 October 2026 to 30 June 2027 (GOV.UK). It returns to 5% from 1 July 2027, GOV.UK says.

• VAT on household gas: 5%, unchanged.

• VAT on electricity in Northern Ireland: 5%, unchanged.

• Ofgem price cap, 1 October – 31 December 2026: £1,723 a year for a typical dual-fuel home on Direct Debit, up 4% from £1,663.

• Average electricity rates (Direct Debit): 26.32p per kWh and 54.83p a day standing charge, without VAT.

• Average gas rates (Direct Debit): 7.97p per kWh and 29.68p a day standing charge, including 5% VAT.

• January – March 2027 cap: not published yet. Ofgem will announce it by 25 November 2026.

What the electricity VAT cut changes

HMRC’s temporary zero rate applies to household electricity in England, Scotland and Wales from 1 October 2026 to 30 June 2027. Gas and other household fuels stay at the usual 5% rate across the UK. Northern Ireland keeps 5% on electricity, so a Great Britain bill won’t match a Northern Ireland one.

Ofgem’s cap tables for October to December 2026 show electricity unit rates and standing charges without VAT, while gas figures still include 5% VAT. That is why comparing this quarter with last needs care: the £1,723 figure isn’t built the same way as the July to September figure of £1,663.

Official figures vs winter forecasts

Some comparison sites and suppliers have suggested the January to March 2027 cap could reach around £2,121 for a typical dual-fuel home, about 23% above £1,723. Cornwall Insight and other forecasters publish different numbers depending on their assumptions about wholesale prices. None of these replace Ofgem’s official announcement, so treat them as estimates, not a guaranteed bill.

Why a VAT cut can still feel like a rise

Two things are happening at once for many households:

1. The October to December cap went up to £1,723 for a typical dual-fuel home on Direct Debit.

2. The January to March 2027 cap could rise again if wholesale and network costs go up, even though electricity carries no VAT in that period.

So the electricity line on your bill gets cheaper, but your total dual-fuel bill can still climb, and gas keeps its 5% VAT. A fixed tariff only helps if its quote beats what you expect to pay on the cap, after standing charges, exit fees and regional rates. Our fixed vs variable energy guide walks through that decision.

Fit summary

• Most likely to benefit: electricity-only homes, such as flats without gas or homes with a heat pump or storage heaters, because all their energy carries 0% VAT.

• Smaller benefit: dual-fuel homes, because the gas part of the bill still carries 5% VAT and standing charges are a big share of low-use bills.

• No change: households in Northern Ireland, where electricity stays at 5% VAT.

• Not covered by this guide: business premises, which follow different rules; see our business energy page.

Direct Debit, prepayment and Economy 7

The £1,723 figure is for a typical dual-fuel home paying by Direct Debit, using 2,500 kWh of electricity and 9,500 kWh of gas a year. Prepayment, Economy 7 and electricity-only homes will have different totals. The VAT cut still applies to your electricity, but your standing charges can make a bigger difference to your bill.

If you are on a smart time-of-use tariff, the VAT cut changes the tax on your bill but not your overnight rates. Check your supplier app’s cost forecast now rather than assuming a flat 5% saving on your whole Direct Debit.

Bills that cover the 1 October changeover

HMRC says that where a billing period includes 1 October 2026, suppliers may work out VAT based on when the electricity was used. Some bills will show both rates across the changeover. Keep your September and October bills in case a standing charge or VAT line looks unfamiliar.

Credit balances, the Warm Home Discount and debt repayment plans aren’t affected by the VAT rate. A 0% VAT line doesn’t clear arrears.

Important conditions

• The 0% rate is temporary and covers 1 October 2026 to 30 June 2027 (extended at the Budget, GOV.UK says) only. Electricity VAT returns to 5% from 1 July 2027, GOV.UK says.

• Only household electricity in Great Britain qualifies. Gas stays at 5%, and so does electricity in Northern Ireland.

• The January to March 2027 cap isn’t confirmed until Ofgem announces it by 25 November 2026.

• Most fixed tariffs charge an exit fee if you leave early, though most suppliers let you leave without a fee in the last 49 days of a fix.

• Quotes depend on your postcode, meter type and usage, so the cap figures are averages.

Checklist for this winter

• Check your October bill or app shows 0% VAT on electricity and 5% on gas.

• Note your current unit rates and standing charges for electricity and gas.

• Check whether you pay by Direct Debit, prepayment or on receipt of bill.

• Get a fresh comparison with your postcode and real usage, rather than reusing an old quote.

• If a fixed deal looks cheaper than staying on the cap through to March 2027, read its exit fees carefully.

• If you stay on the cap, put 25 November 2026 in your diary for Ofgem’s January to March 2027 announcement.

How to switch in four steps

1. Find your annual usage in kWh on a recent bill or in your supplier app.

2. Compare quotes for your postcode, including standing charges.

3. Pick a tariff and check its exit fee and contract length.

4. Take a meter reading on switch day. The new supplier handles the rest, and your supply isn’t interrupted.

Final decision card

Stay on the price cap if no fixed quote beats it once exit fees are counted; the VAT cut applies either way. Compare fixed tariffs now if you want certainty before the January 2027 cap is announced and a quote for your home comes in below what you expect to pay. Check again after 25 November 2026, when Ofgem confirms the next cap.

FAQ

Is VAT on my electricity bill really 0% now?

Yes, for household electricity in Great Britain. The temporary zero rate runs from 1 October 2026 to 30 June 2027 (extended at the Budget, GOV.UK says). Gas stays at 5%, and Northern Ireland electricity stays at 5% too.

Does the £1,723 price cap already include the VAT cut?

Yes. Ofgem published the October to December 2026 electricity rates without VAT because of the cut, while the gas rates still include 5% VAT. That is why the £1,723 figure isn’t directly comparable with older quarters.

Is £2,121 the January 2027 price cap?

No. That is a forecast from comparison sites and suppliers, not an official figure. Ofgem will announce the January to March 2027 cap by 25 November 2026.

How much will the VAT cut save me?

It depends on how much electricity you use and your regional rates. As a rough guide, a home using 2,500 kWh a year at the average Direct Debit rates would have paid about £43 in VAT on electricity over six months at 5%, so the saving is in that region. Electricity-only homes save more.

Should I fix my energy now because of the VAT cut?

Only if a fixed quote for your postcode costs less than you expect to pay on the price cap through to March 2027. The VAT cut applies to fixed and variable tariffs alike, so it isn’t a reason on its own to fix. Check exit fees before you switch.

Can I use this for a business site?

No. Business energy is a separate market with different VAT rules. Use our business energy page instead.

Sources

Sources: Ofgem, “Changes to energy price cap between 1 October and 31 December 2026”; Ofgem energy price cap unit rates and standing charges; GOV.UK, temporary zero rate of VAT for domestic electricity in Great Britain. Forecasts of around £2,121 for January to March 2027 are estimates only. We can’t quote your personal usage or regional rate here, so check quotes for your postcode before you switch.