A temporary zero rate landed on qualifying electricity in Great Britain on 1 October 2026 and expires on 31 March 2027. Gas was left where it was. Here is who qualifies, and what to do with a bill that straddles the date.
HMRC announced the measure in Revenue and Customs Brief 10 (2026) on 8 September 2026. For the six months from 1 October 2026 to 31 March 2027, qualifying supplies of electricity in England, Scotland and Wales are charged at 0% instead of 5%.
Three things about it are commonly misread, and all three cost money.
It did not widen the relief. The brief is explicit that there are no changes to which supplies of electricity qualify; suppliers are told to keep using VAT Notice 701/19 to work that out. A business paying 20% on 1 September was paying 20% on 1 October. The cut moved one rate down to nil; it did not move anybody between categories.
It did not touch gas. The brief says other fuel types are not affected. So a small shop that qualifies on both can quite correctly receive an electricity bill at 0% and a gas bill at 5% in the same week, and a bookkeeper who "corrects" one to match the other has introduced an error.
It did not apply in Northern Ireland, where qualifying electricity remains liable at the reduced rate of 5%. A business with premises either side of the Irish Sea has two rates running on the same supply type.
Everything turns on whether a supply is for qualifying use. There are three ways in, and the third is the one businesses miss.
Supplies to dwellings and to certain residential buildings — care homes, children's homes, student accommodation, monasteries, armed forces residential accommodation — are treated as domestic. So are supplies to a self-catering holiday let and to a caravan or houseboat used as a residence.
Fuel and power used by a charity otherwise than in the course of a business qualifies. The trap is that much of what a charity does is business for VAT purposes even where it makes no profit, so a charity shop's energy is not automatically covered by this route.
This is the route that applies to ordinary small commercial premises, and it has nothing to do with what the building is used for. Where consumption is small enough, the supply is treated as domestic automatically.
| Supply | De minimis limit | Source |
|---|---|---|
| Electricity | Average of no more than 33 kWh per day, or 1,000 kWh per month, to one customer at any one of their premises | Notice 701/19, para 5.2 |
| Piped gas | Average of no more than 5 therms or 145 kWh per day, or 150 therms or 4,397 kWh per month, on the same basis | Notice 701/19, para 4.2 |
The limits apply whether the bill is based on a meter reading or an estimate, and paragraph 3.2.2 is clear that no certificate is needed to apply the lower rate to a de minimis supply. The supplier should simply be applying it.
Where one supply is used partly for a qualifying purpose and partly not — a flat above a shop on a single meter, a farmhouse and farm buildings on one account — paragraph 3.4 of the notice applies a single threshold rather than a sliding scale.
Mixed-use supplies do need a certificate, one for each set of premises, stating the exact percentage of qualifying use, the parties' details and the customer's VAT number, and signed by a responsible officer who confirms they will tell the supplier if the percentage changes. Suppliers are expected to make reasonable checks, and a customer who gives an incorrect certificate can face a penalty. That is a document worth getting right rather than guessing at.
Where a billing period runs across 1 October 2026, HMRC allows the supplier to base liability on the date the energy was consumed rather than the invoice date, and recommends meter readings to split the period. In practice that means an invoice covering September and October can show two rates on one document.
Three rules follow for the bookkeeping, and they apply equally in Sage and Xero.
Supplies for domestic use and for a charity's non-business use are excluded from the Climate Change Levy, and because the levy legislation mirrors the VAT domestic use provisions, a supply attracting the lower VAT rate is in general outside the levy too — HMRC's internal guidance at VFUP5000 sets out that relationship.
Where the levy is properly charged it forms part of the value on which VAT is calculated, so it belongs inside the net figure rather than sitting beside it as a separate disbursement. If the levy is appearing on a bill for premises you believe are de minimis, that is a useful signal that the supplier has you in the wrong category for VAT as well.
A two-room optometry practice in Peterborough. One meter, no gas. Annual electricity consumption 9,600 kWh, billed monthly.
That is the point of the example. For a fully taxable business the wrong rate is a cash-flow annoyance. For a partly exempt one — opticians, care providers, financial intermediaries — the irrecoverable slice is money gone, every year, until somebody reads the bill.
| Supply | To 30 Sep 2026 | 1 Oct 2026 – 31 Mar 2027 |
|---|---|---|
| Electricity, qualifying, Great Britain | 5% | 0% |
| Electricity, qualifying, Northern Ireland | 5% | 5% |
| Electricity, non-qualifying | 20% | 20% |
| Piped gas, qualifying | 5% | 5% |
| Piped gas, non-qualifying | 20% | 20% |
Rates and limits above are from VAT Notice 701/19 and Revenue and Customs Brief 10 (2026), both linked in full. This page is a general reference and not advice on a particular business — if a figure here does not match your own bill, that is exactly the sort of thing worth sending over.