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0% VAT on electricity bills
What the change means for you
Written by David Walter, Chief Commercial Officer
Last updated: 30 Sep 2026
The UK Government has reduced VAT on domestic electricity bills from 5% to 0% starting 1 October 2026. The measure is designed to give households breathing space on cost-of-living pressures over the winter.
The change is designed to reduce household electricity costs, and the Government estimates that removing VAT from electricity could take around £45 off the annual Ofgem price cap for a typical household.
If you're a Utility Warehouse electricity customer, you don't need to apply for the VAT reduction or claim it separately. The discount is automatically applied across our electricity tariffs from October.
What does the 0% VAT cut on electricity mean for UK households?
Domestic electricity is usually subject to a 5% VAT rate. From 1 October 2026 to 31 March 2027, this tax rate falls to 0%.
Here are the key things to know:
Electricity only — The cut applies exclusively to domestic electricity unit rates and daily standing charges. If you have a dual-fuel account, VAT on the electricity part of your energy costs reduces to 0%, while the 5% VAT on your gas remains unchanged.
6-Month Window — The 0% rate applies for six months across winter. A decision on what happens after 31 March 2027 will be made by the Government at a future Budget plan.
Automatic application — The discount is applied directly through billing calculations — there is no separate rebate to request or an application form to complete.
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Which Utility Warehouse electricity tariffs will be affected?
The VAT reduction is expected to benefit household electricity customers across Utility Warehouse tariff types.
For Utility Warehouse customers, this includes customers on our:
EV tariffs (The 0% VAT rate applies to electricity used for home EV charging on domestic tariffs)
Our tariffs have been updated in line with regulatory requirements to ensure the 0% VAT rate is reflected from 1 October.
If you're on our Tracker Tariff, your Q4 rates (1 October – 31 December) have been updated to reflect Ofgem's new Price Cap while incorporating both your guaranteed discount and the 0% VAT rate on electricity.
How much could you save from the 0% VAT cut?
While the Government’s headline figure estimates an annualised saving of ~£45 for a typical home, actual savings over the six-month policy period depend on your energy consumption, tariff type, and individual circumstances.
removing 5% VAT reduces VAT-inclusive charges by 4.76%, savings are estimated over the six-month policy window (1 October 2026 – 31 March 2027), which is based on Ofgem's Typical Domestic Consumption Values (TDCVs), break down as follows:
Household Usage Profile | Annual Usage (kWh) | 6-Month Electricity Spend (Inc. 5% VAT)* | Estimated 6-Month 0% VAT Saving (4.76% Reduction) |
Low Usage (1–2 occupants) | ~1,600 kWh/yr | ~£260 | ~£12.38 |
Medium / Average (Typical home) | ~2,500 kWh/yr | ~£400 | ~£19.04 |
High Usage (Large family / home office) | ~3,800 kWh/yr | ~£600 | ~£28.57 |
*Note: Baseline costs are illustrative estimates using standard Direct Debit rates. Actual cash savings depend on individual usage and electricity tariffs.
What does the VAT cut mean for the Ofgem Energy Price Cap?
The VAT reduction and the Ofgem Energy Price Cap are related to what you ultimately pay, but they are not the same thing:
The VAT cut lowers the government tax applied to domestic electricity.
The Ofgem Price Cap is reviewed separately every three months to limit maximum unit rates and standing charges based on underlying market factors.
What do Utility warehouse customers need to do?
For now, nothing.
No application required — You don't need to call us or apply online to claim the reduction.
No need to switch — You don't need to change tariffs specifically because of the VAT change.
Smart meters — If you have an operating smart meter, it’ll automatically send usage info to ensure accurate billing.
Standard meters — If you don't have a smart meter, continue submitting regular meter readings so your bill accurately reflects actual consumption.
You won't need to:
Apply for the VAT reduction
Contact us to claim it
Switch tariff specifically because of the VAT change
We'll provide more information once the October prices and implementation details have been confirmed.
Struggling with your energy bills?
Reducing VAT on electricity helps with costs, but we know energy bills can still put pressure on household finances.
If you're having difficulty paying your bill, support is available. UW can work directly with you on flexible payment solutions, and independent advice is also available through organisations like Citizens Advice and StepChange.
Read our Guide to Energy Bill Support to find out what help is available.
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“Whether you’re looking for a variable tariff or prefer a fixed tariff for total peace of mind, we offer energy prices consistently below the price cap when you bundle with our other award-winning services. We can get you switched over in as little as two days with no disruption to your supply. We offer even greater savings when you upgrade to a free smart meter so you never have to worry about giving a meter reading again.”
David Walter,
Chief Commercial Officer
FAQs
The Government has said that energy suppliers are expected to pass the VAT reduction on to customers, including those on fixed tariffs.
You don't need to switch away from your fixed tariff to benefit from the VAT change.
The VAT reduction also applies to electricity customers on our Tracker tariffs.
Utility Warehouse's Tracker Tariff follows Ofgem's Energy Price Cap while providing an applicable guaranteed discount below the equivalent Price Cap rates. Tracker prices are reviewed quarterly when Ofgem updates the Price Cap.
Because the next Price Cap period and the VAT reduction both begin on 1 October, we'll make sure customers have clear information about what the combined October changes mean for their rates.
You won't need to change tariff or take any action specifically to receive the VAT reduction.
Yes. The 0% VAT rate applies to all domestic electricity usage, including cheaper off-peak electricity rates on our EV tariffs.
No. The announced VAT reduction is for domestic electricity.
If you're a dual-fuel customer, the VAT change will therefore affect the electricity element of your energy costs rather than your gas.
You don't need a smart meter to qualify for the electricity VAT reduction.
If you have a smart meter that's communicating normally, it automatically sends your energy usage information to us, helping make sure your bills are based on accurate readings.
If you don't have a smart meter, it's a good idea to continue submitting regular meter readings so that your bills accurately reflect the energy you've used.
The VAT change itself will be handled through billing, so there's no special meter reading or additional action required to claim it.
Domestic electricity is currently subject to 5% VAT. The Government has announced that this will reduce to 0% from 1 October 2026
The announced change takes effect from 1 October 2026.
The Government has announced a six-month period from 1 October 2026 to 31 March 2027. It has said a decision about what happens after that will be made at a future Budget.
You won't need to apply or make a separate claim. Utility Warehouse is working through the implementation details to make sure the reduction is reflected correctly across our electricity tariffs.
Not necessarily. The VAT reduction lowers the tax applied to domestic electricity, but other elements affecting energy prices can change at the same time.
No. The VAT change isn't dependent on having a smart meter.
There's no special meter-reading requirement simply to receive the VAT reduction. If you don't have a communicating smart meter, however, continuing to provide regular meter readings can help ensure your bills are based on your actual energy use.
The policy applies across England, Scotland, and Wales. (Geographical treatment for Northern Ireland subject to final regulatory confirmation).
We'll provide customers with more information once the October prices and implementation details have been confirmed.
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