The government has confirmed that VAT on household electricity bills will be scrapped this winter, reducing the rate from 5% to 0% as of October 1, 2026. The move is intended to lower bills and provide extra support during the colder months, according to officials.
What the VAT cut means for households
The change applies to all household electricity tariffs, including fixed energy tariffs. The government estimates that the average household will save about £45 a year. In most cases, suppliers will automatically apply the reduction, so households do not need to take any action.
However, EDF Energy has warned that the actual saving will vary depending on how much electricity a household uses. The £45 figure is only an average. EDF Energy notes that the cut applies only to electricity bills, not gas bills.
Impact on dual fuel tariffs
For households on a dual fuel tariff, the VAT reduction will appear only on the electricity portion of the bill. Gas will continue to be charged at 5% VAT and will still be shown on the dual fuel bill.
EDF Energy also confirms that the VAT change applies to household electricity bills in England, Scotland, and Wales. The UK government has said that the change is funded for this financial year, and any further steps, including longer-term measures, will be decided at the next Budget, due later this year.
Why VAT is charged on energy bills
VAT on energy bills is set by the government. Most households pay 5% VAT on electricity because energy is classed as a good or service in the UK. The rate can differ depending on whether the energy is for domestic or non-domestic use.
