From 1 October 2026, VAT on domestic electricity falls from 5% to 0%. The cut runs until 31 March 2027 and then reverts to 5% unless it's extended. Gas is unaffected and keeps its 5% throughout.
It reaches fixed-tariff customers too
A point worth being precise about, because it's widely reported wrongly: VAT is a tax on the supply of energy, not a component of your tariff. Your fixed rate excluding VAT stays exactly where it was; the VAT-inclusive amount you actually pay for electricity falls. You don't need to check whether your supplier “passes it through”, and you don't need to be on a variable tariff to benefit.
The headline saving and the real one are different numbers
The government has put the cut at around £45 a year for a typical household. Martin Lewis netted that against the cap rise landing the same day — 4.8% coming off electricity against roughly 3.1% going onto gas and electricity — and put the real six-month saving closer to £20. “A good totem,” he called it, “but for me it's only a totem.”
It has since got worse rather than better. MoneySavingExpert has updated that analysis to say later forecasts mean the saving is largely swallowed up by cap rises for most households over October to December, and Lewis has flagged that the January 2027 cap could remove the benefit altogether. Expect a wash, not a windfall — and nobody knows the exact figure until Ofgem confirms the cap by 26 August 2026.
There's a second complication for anyone comparing quarters. Ofgem quotes cap rates including VAT. October's electricity rates will be quoted at 0% while July's were quoted at 5%, so the two do not compare like for like. A chunk of any apparent fall in the electricity unit rate is the tax change, not a price change. Gas rates do compare directly.
What to do
Nothing. It applies automatically to every domestic electricity supply, on every tariff, with no claim to make. The one thing worth diarising is 1 April 2027, when it reverts — a fix taken now will run straight through that date, so factor it into any twelve-month decision you make between now and then.
The full explainer, including the interaction with the cap and what reversion means, is in our electricity VAT cut guide. Source: MoneySavingExpert — Martin Lewis on the electricity VAT cut.
The full explainer on this subject: Electricity VAT cut guide. More updates on our energy news page.