0% VAT on home electricity from 1 October, and the new price cap
VAT on household electricity in Great Britain dropped from 5% to 0% on 1 October 2026, and in the Budget on 28 October the government said it will stay at 0% until 30 June 2027. Gas keeps its 5%, and the price cap for October to December is 26.32p/kWh for electricity with no VAT on top.
Econotion · Updated 8 November 2026
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Electricity on the price cap goes from 26.11p/kWh to 26.32p/kWh, so it's almost unchanged per unit, and gas goes from 7.33p to 7.97p/kWh. Ofgem says a typical dual fuel bill goes up 4%, with homes that mainly use electricity less affected than those that mainly use gas.
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The numbers, 1 October to 31 December 2026
| Price cap (GB average, direct debit) | Unit rate | Standing charge | VAT |
|---|---|---|---|
| Electricity | 26.32p/kWh | 54.83p/day | 0% |
| Gas | 7.97p/kWh | 29.68p/day | 5% |
The previous cap was 26.11p/kWh for electricity and 7.33p/kWh for gas, and Home Energy Scotland puts a typical bill at around £1,723 a year. Ofgem says it will announce the cap for January to March 2027 on 25 November 2026, and we'll update this page when it does.
What it means for your bill
On electricity the VAT cut cancels out most of an underlying rise. The old 26.11p included 5% VAT, so it was about 24.9p before tax, and the new 26.32p has no VAT, which puts the underlying price up by roughly 6%. That's our calculation rather than Ofgem's.
Gas has no VAT cut, so its 9% rise per unit goes straight onto bills.
Electricity is now about 3.3 times the price of gas per kWh on the cap, and that ratio decides a lot of whether a heat pump is cheaper to run than a gas boiler. The running-cost comparison is in the electric heating guide.
If you're not on the price cap
The cut is to VAT itself, and the government says suppliers are expected to pass it on to all customers, including those on fixed tariffs, but it's worth checking your October bill shows 0% VAT on electricity.
Octopus's Go fix available from 30 October 2026 already has the 0% VAT built in, with a night rate of 9.4p/kWh, and the Go review has the regional figures.
When it ends
Ofgem originally gave the end date as 31 March 2027. In the Budget on 28 October 2026 the government said it will extend the 0% rate on household electricity to 30 June 2027, and that it will lay the legislation before Parliament in early 2027.
The 0% VAT on installed heat pumps and home batteries is a separate relief and isn't covered by the extension. It still ends on 31 March 2027, when it goes back to 5%, and the government says heat batteries will be added to the same relief from 1 April 2027.
Other Budget changes to energy bills
- A £100 Household Energy Payment for homes in council tax bands A to D in England, paid from January 2027. The government says Scotland, Wales and Northern Ireland get extra funding instead.
- The government has asked Ofgem to remove standing charges from household gas bills as early as 2027, with the cost moved onto the unit rate.
What to check
Check your October bill for the 0% VAT line on electricity and raise it with your supplier if it isn't there. If you're thinking about a heat pump or battery, the 0% VAT on installation still ends on 31 March 2027, three months before the cut on electricity, so get quotes this winter rather than leaving it to spring.
Common questions
When does VAT on home electricity go back up?
VAT on household electricity has been 0% since 1 October 2026. The original end date was 31 March 2027, and in the Budget on 28 October 2026 the government said it will extend the 0% rate to 30 June 2027, with the legislation due in early 2027. VAT on gas stays at 5% throughout.
What is the energy price cap from October 2026?
For 1 October to 31 December 2026 the GB average electricity cap is 26.32p/kWh with a 54.83p a day standing charge at 0% VAT. Gas is 7.97p/kWh with a 29.68p a day standing charge at 5% VAT.
Does the VAT cut apply to fixed tariffs?
We expect it to apply on any tariff, fixed or variable, so check that your October bill shows 0% VAT on electricity.
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