STORY
VAT has been removed from domestic electricity bills across Great Britain, with the Government estimating that the measure will reduce the annual Ofgem price cap by around £45. The reduction from 5 per cent to zero took effect on 1 October 2026 and will remain in place for the current financial year.
Energy suppliers are expected to pass the reduction on to customers, including those on fixed tariffs. Eligible charities, residential care homes and small organisations receiving domestic energy VAT relief may also benefit from the change.
The measure is expected to cost around £850 million and is being funded through the cancellation of the Digital ID programme. Comparable funding will be provided to the Northern Ireland Executive because European Union VAT rules continue to apply to electricity in Northern Ireland.