UK announces a 0% VAT rate on domestic electricity from 1 October 2026 — not yet legislated
This change is proposed and is not law. The rules below describe what would change if it is adopted.
This page records one dated change. For the rules in United Kingdom as they stand today, see the United Kingdom guide →
- Jurisdiction
- 🇬🇧 United Kingdom
- Tax
- VAT
- Change type
- Rate change
- Status
- Proposed
- Impact
- Plan ahead
- Announced
- 21 July 2026
- Effective
- 1 October 2026
- Authority
- Prime Minister's Office, 10 Downing Street / HM Treasury
- Systems
- Tax engine, ERP, Invoicing
- Verified
- Fetched from official source · medium confidence
Domestic household electricity customers, plus small businesses eligible for the domestic energy VAT relief, charities and residential care homes on the reduced rate.
Prepare but do not yet apply billing-system changes for 0% VAT on domestic electricity, and watch for the order amending Schedule 7A VATA 1994 that must be made before 1 October 2026.
Tax engineERPInvoicing
The Prime Minister announced on 21 July 2026 that VAT on domestic household electricity will be cut from 5% to 0% from 1 October 2026, funded in the current financial year by cancelling the Digital ID programme. The announcement covers electricity and not gas, and extends to small businesses eligible for the domestic energy VAT relief, charities and residential care homes on the reduced rate. As at 3 August 2026 no implementing statutory instrument had been made: legislation.gov.uk lists three 2026 UK statutory instruments with 'value added tax' in the title (S.I. 2026/765, 2026/576 and 2026/307), none concerning electricity or the Schedule 7A energy provisions.
What changed in detail
This is an announcement, not law. The Prime Minister announced on 21 July 2026 that VAT on domestic household electricity would be cut from 5% to 0% from 1 October 2026, funded in the current financial year by cancelling the Digital ID programme.
The announcement covers electricity and not gas, and extends to small businesses eligible for the domestic energy VAT relief, and to charities and residential care homes on the reduced rate.
As at 3 August 2026 no implementing statutory instrument had been made. legislation.gov.uk listed three 2026 UK statutory instruments with “value added tax” in the title — S.I. 2026/765, 2026/576 and 2026/307 — none of which concerns electricity or the Schedule 7A energy provisions.
What it means
We are recording this as proposed rather than enacted, and the distinction is not pedantry: the last three issues each carried a correction caused by a measure reported at announcement stage that then changed shape. Build the rate, do not switch it on, and watch for the order amending Schedule 7A VATA 1994. Energy suppliers have a hard billing-cycle problem if the instrument lands close to 1 October — a rate change mid-cycle is an apportionment, not a flip.