What is the electricity VAT cut and when does it start?
The electricity VAT cut is a temporary tax change that removes VAT from the electricity part of your household bill. It runs from 1 October 2026 to 31 March 2027, announced by Prime Minister Andy Burnham as one of his first moves in the job. Right now, VAT on domestic electricity sits at 5%. From 1 October, that drops to 0%, automatically, on every electricity tariff.
You don’t need to apply for anything or ring your supplier. If you pay for electricity, the electricity VAT cut should show up on your bill without you lifting a finger, which, for once, makes doing nothing the right call. It lands at a point when plenty of households are still feeling the summer’s price rises and bracing for whatever Ofgem announces next.
How much could the electricity VAT cut save you?
For a typical household, the electricity VAT cut is expected to save around £45 a year, based on Ofgem’s price cap for a typical dual fuel customer. That’s the government’s own estimate, and it depends on how much electricity you actually use, so your household could see more or less than that.
To put that in context, here’s where the current Ofgem price cap stands, checked August 2026.
| Ofgem price cap (typical dual fuel, direct debit) | Period | Detail |
|---|---|---|
| Annual bill | 1 Jul to 30 Sep 2026 | £1,663 a year |
| Electricity standing charge | 1 Jul to 30 Sep 2026 | 57.19p a day |
| Gas standing charge | 1 Jul to 30 Sep 2026 | 29.04p a day |
| Next cap announced | By 26 August 2026 | Sets rates for 1 Oct to 31 Dec 2026 |
Source: Ofgem, checked August 2026.
Ofgem hasn’t confirmed the October figure yet, but analysts at Cornwall Insight have forecast the new cap could land somewhere around £1,701 to £1,747 a year, a rise driven mostly by wholesale costs rather than anything to do with the electricity VAT cut. If that forecast holds, the VAT cut would soften the blow rather than cancel it out completely.
Key takeaways
- The electricity VAT cut runs from 1 October 2026 to 31 March 2027 and applies automatically, no action needed.
- VAT on domestic electricity drops from 5% to 0%, saving a typical household an estimated £45 a year, according to the government.
- The cut only applies to electricity, so gas charges are unaffected.
- Ofgem’s next price cap review, covering 1 October to 31 December 2026, is due by 26 August 2026.
- Switching supplier or tariff can still save you more on top of the VAT cut.
Why the VAT cut won’t fix the Do Nothing Default
A VAT cut is the same for everyone. Stuck on your supplier’s priciest standard tariff, or already switched to something leaner months ago? You get the same percentage off either way. It rewards nobody for shopping around, and it doesn’t touch what we’d call the Do Nothing Default, that quiet habit of staying put because switching feels like a faff.
The electricity VAT cut is worth having. £45 is £45, and nobody’s turning that down. But it’s a flat discount on whatever you’re already paying, not a discount on what you could be paying elsewhere. If your tariff is expensive, the VAT cut just makes an expensive tariff slightly less expensive. Even Roo, our relentlessly upbeat mascot, would tell you that’s not quite the same as finding a genuinely better deal.
Households who haven’t switched in a while are usually the ones with the most to gain, because standard variable tariffs tend to sit well above the cheapest fixed deals on the market.
What else changes on 1 October 2026?
The electricity VAT cut isn’t the only thing moving on 1 October. It lands on exactly the same day Ofgem’s new price cap takes effect for the fourth quarter of 2026, so your bill could see two changes at once: a lower VAT rate and a new set of unit rates and standing charges.
Ofgem is due to confirm the October to December 2026 cap by 26 August 2026. Whatever that figure turns out to be, the electricity VAT cut will be applied on top of it, not instead of it. If wholesale costs push the cap up, as forecasters currently expect, the VAT cut will only cover part of any rise, not all of it.
How to make the most of the VAT cut
The simplest way to stack the electricity VAT cut with a genuine saving is to check whether you’re still on your supplier’s standard variable tariff. Millions of households are, often without meaning to be, and standard tariffs are usually the priciest option on the table.
A quick comparison takes a few minutes and shows you whether a fixed deal would leave you better off once the new price cap and the electricity VAT cut are both factored in. It costs nothing to check, and you’re not tied to switching if nothing beats what you’re already on.
If you’d rather understand the bigger picture first, our guide to what the energy price cap actually means or our breakdown of the October price cap prediction are good places to start. When you’re ready to move, switching supplier usually takes about the time it takes to make a cup of tea.
Frequently asked questions
- When does the electricity VAT cut start?
- The electricity VAT cut starts on 1 October 2026 and is due to run until 31 March 2027, according to the government’s announcement.
- Does the VAT cut apply to gas bills too?
- No. The electricity VAT cut only applies to the electricity part of your bill. Gas VAT stays the same, so dual fuel customers will see the reduction on the electricity line only.
- How much will I save from the electricity VAT cut?
- The government estimates a typical household will save around £45 a year, based on Ofgem’s price cap. Your actual saving depends on how much electricity you use, so it could be more or less.
- Do I need to do anything to get the VAT cut?
- No. The electricity VAT cut is applied automatically by your supplier, so there’s nothing to apply for or switch on.
- Will switching supplier save more than the VAT cut?
- It can. The VAT cut is a flat percentage off whatever you’re already paying, so if you’re on an expensive standard tariff, switching to a cheaper deal could save you more on top of it.
