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0% or 5% VAT on business electricity? The October 2026 change explained

Most business electricity carries VAT at the standard rate of 20%. Some does not. From 1 October 2026 to 31 March 2027, electricity that qualifies for relief in Great Britain is charged at 0%, not 5%. Small business sites can qualify without doing anything, through the de minimis rule.

Which business electricity qualifies?

VAT relief on fuel and power applies to "qualifying use". HMRC's Fuel and power (VAT Notice 701/19) lists three routes:

• Domestic use, such as flats and some residential accommodation.
• Charity non-business use, for activities a charity doesn't charge for.
• De minimis supplies: small quantities are treated as domestic use even when the customer is a business.

The first two usually need a VAT declaration (a certificate) given to your supplier. The third needs nothing: the supplier should apply it automatically.

The de minimis limits

A supply is de minimis if it is no more than an average of 33 kWh a day, or 1,000 kWh a month, of electricity to one customer at one premises. For piped gas the limits are 145 kWh a day or 4,397 kWh a month. The notice says the limits apply whether the bill is based on a meter reading or on an estimate (paragraphs 4.2 and 5.2).

To test your own bill, divide the kWh billed by the number of days in the billing period. A shop, office or café using under 33 kWh a day of electricity is within the limit, even though it is a business.

What changed on 1 October 2026

The government introduced a temporary zero rate for qualifying electricity in Great Britain. The Temporary zero rate of VAT in Great Britain for domestic electricity (tax information and impact note) explains that the order moves these supplies from the reduced rate to a new zero-rate group, with the same description of which supplies qualify. HMRC's Revenue and Customs Brief 10 (2026): temporary zero rate of VAT for domestic electricity in Great Britain confirms there are no changes to which supplies of electricity qualify for relief.

So the rule for a de minimis business electricity supply in Great Britain is:

• up to 30 September 2026: 5%;
• 1 October 2026 to 31 March 2027: 0%;
• from 1 April 2027: 5%, unless the zero rate is extended.

What did not change

• Northern Ireland: qualifying electricity stays at 5%.
• Gas: qualifying gas stays at 5% across the UK.
• Larger supplies: electricity above the de minimis limits without a qualifying-use declaration stays at 20%.

Bills that span 1 October

Many bills run across the change, for example 15 September to 14 October. HMRC's brief says that where a billing period includes 1 October 2026, suppliers may work out the VAT by the date the energy was used. It recommends meter readings, and allows other methods if they give a fair and reasonable result.

Splitting by days, a 30-day bill from 15 September to 14 October has 16 days at 5% and 14 days at 0%. On a corrected net of £276.00, that is about £7.36 of VAT, not £13.80 at 5% for the whole bill, and far less than £55.20 at 20%.

How to check your bill

1. Find the billing period and the kWh billed. Work out the average a day.
2. If it is within the de minimis limit (or you have a qualifying-use declaration), check the VAT rate against the dates above.
3. If the bill charges 20% on a de minimis supply, it is likely wrong. Ask the supplier to re-issue it.
4. If it charges a reduced rate on a large supply, check whether you gave a declaration. If not, the VAT could be corrected later.

CheckEnergyBill does this automatically, including the day split for bills that span 1 October, and shows the source for each rate. Check a bill free.

Sources: Fuel and power (VAT Notice 701/19); Temporary zero rate of VAT in Great Britain for domestic electricity (tax information and impact note); Revenue and Customs Brief 10 (2026): temporary zero rate of VAT for domestic electricity in Great Britain; VAT rates (GOV.UK).