From 1 October 2026, the VAT rate on domestic electricity in Great Britain will be reduced from 5% to 0% following a UK Government decision. This is a temporary change and applies to electricity supplied between 1 October 2026 and 31 March 2027.

We will apply the 0% rate automatically to domestic electricity charges. There is nothing you need to do – you do not need to contact us, apply for anything, switch tariff or change anything on your account.

Until 30 September, VAT on your electricity stays at 5% as normal.

What is changing?

For electricity supplied from 1 October 2026 to 31 March 2027, VAT on domestic electricity charges is 0% instead of 5%.

The change covers both the unit rate and the standing charge on your electricity.

Does it apply to my tariff?

Yes. All our domestic customers are on our standard variable tariff, and the 0% rate applies to it.

For standard variable tariffs, the benefit comes through the Ofgem Price Cap. Ofgem has set the price cap for 1 October to 31 December 2026 with no VAT on electricity, so the 0% rate is already built into the prices you will pay. You will not see a further 5% reduction on top of that.

You do not need to do anything to benefit.

Do I need to apply or contact Home Energy?

No. This is not a rebate or an account credit.   

We will make the change automatically. You do not need to:

• contact us
• complete an application
• change tariff
• update your payment method
• make any changes to your account

Does it apply to gas?

No. The change covers domestic electricity only.

If we supply both your gas and electricity, VAT will still be charged on your gas at the rate that applies at the time.

What happens to a bill that covers both September and October?

Where a bill covers electricity used either side of 1 October, we’ll split the charges so that the right VAT rate applies to each part – 5% up to 30 September, 0% from 1 October.

If you can, submitting a meter reading close to 1 October helps us split the bill using your actual usage rather than an estimate. This is optional; we will make the split either way.

How much could I save?

The Government has estimated that removing VAT takes around £45 off the level of the annual Ofgem price cap from October.

That’s a figure for the price cap, not a payment, a credit, or a guaranteed saving. Two things to keep in mind:

• the 0% rate applies for six months, from 1 October 2026 to 31 March 2027, not for a full year
• the cap figure is based on a typical household’s usage

What you save depends on how much electricity you use, your prices, and any other price changes during the period. If you use more electricity than average, you’re likely to save more, and less if you use less.

It’s also worth knowing that the price cap for 1 October to 31 December 2026 is 4% higher than for the previous three months, because of other costs that go into it. The VAT change is already reflected in that figure. Without it, the increase would have been bigger.

What the change from 5% to 0% actually means

If the electricity part of your bill comes to £60 before VAT, 5% VAT would add £3. At 0% VAT, that £3 is not charged.

It is not a 5% discount off your whole bill. It is the removal of the 5% VAT that applies to domestic electricity charges only.

How will it appear on my bill?

Your bill will show 0% VAT applied to electricity charges for usage from 1 October 2026.

If you get a combined bill for gas and electricity, the two fuels will show different VAT treatment, because the change only applies to electricity.

Will my monthly Direct Debit go down?

The VAT reduction lowers the cost of your electricity compared with what it would otherwise have been. That does not necessarily mean your Direct Debit will change straight away.

Your Direct Debit is a regular payment towards your energy account rather than a bill for a particular month’s usage. When we review it, we look at your account balance, your estimated annual usage, your tariff prices and expected seasonal changes in how much you use.

If your Direct Debit does need to change, we’ll let you know at least 10 working days before we take the new amount. There’s no need to contact us just because of the VAT change.

Will my overall bill definitely go down?

Not necessarily. The reduction makes your electricity charges lower than they would have been without it, but your overall bill is also affected by how much gas and electricity you use, seasonal increases in usage over winter, changes to Tracker or variable prices, changes to the Ofgem price cap, and your account balance.

You may well see your electricity unit rate go up from 1 October even though VAT has been removed. That’s because the other costs that make up your price have risen. It does not mean the VAT change has not been applied – it has, and without it your price would be higher still.

Prices from 1 October also cannot be compared directly with prices before that date, because earlier prices included 5% VAT and these do not.

Either way, you will pay 0% rather than 5% VAT on domestic electricity charges between 1 October 2026 and 31 March 2027.

What happens after 31 March 2027?

Unless the Government announces otherwise, VAT on domestic electricity returns to 5% for electricity supplied from 1 April 2027. We will update this article if anything changes.