VAT Cut on Electricity Bills 2026: What It Means For You

From 1 October 2026, the VAT rate on domestic electricity in Great Britain will be temporarily reduced from 5% to 0%, following a UK Government decision. Here's what's changing, and what it means for your account.

What's Changing

The Government is temporarily reducing VAT from electricity bills from 1 October 2026.

• Electricity bills: VAT drops from 5% to 0%

• Gas bills: VAT stays at 5%, this change is for electricity only

• Dual fuel customers: you'll see the saving on the electricity part of your bill, not the gas part

This applies to homes in England, Scotland, and Wales, on any electricity tariff, including all our fixed, So Flex, and So Green Tracker tariffs.

Do I Need to Do Anything?

No. We'll apply the VAT cut to your account automatically from 1 October. You don't need to contact us, change your tariff, or update your details.

What Will I Save?

The Government estimates the typical home will save around £45 a year.¹ Your actual saving depends on how much electricity you use.

Ofgem's price cap is going up on 1 October. This means your bill could still go up overall, even with the VAT cut applied, because the two changes land on the same day.

If you're on a fixed tariff, the price cap doesn't affect your rates, so you'll see the VAT saving reflected clearly in your electricity costs.

What Does This Mean for My Direct Debit?

If you pay by Direct Debit, your monthly amount is based on your estimated energy use over the year, not on each individual bill.

The VAT cut works out at around £3.75 a month for a typical home.² On its own, this wouldn't usually be enough to change your Direct Debit amount.

We regularly review Direct Debit amounts to make sure they still match your energy use, especially around price cap changes. If your Direct Debit is reviewed around 1 October, it's more likely to be because of the price cap update than the VAT cut on its own.

If your Direct Debit does change, we'll always let you know beforehand and explain why.

Why Is This Happening?

This isn't the first step the Government's taken to bring down energy costs this year. In April 2026, the Government removed certain costs from bills, including ending the Energy Company Obligation scheme, and cutting most of the Renewables Obligation charge.³ You can find out more about the Government's latest decision here.

Cutting VAT on electricity from October is the next step, as the Government continues to look for ways to bring bills down.

We're Here if You Need Support

If paying for energy feels difficult right now, please don't struggle on your own. We can talk through payment plans, our Priority Services Register, and other ways we can support you. Head to our Bill Support Hub to find out more.

FAQs

When does the VAT cut start?

On 1 October 2026.

Does the VAT cut apply to gas bills too?

No. It only applies to electricity. Gas keeps its 5% VAT rate.

Will I need to do anything to get the saving?

No. We'll apply it to your account automatically. There's nothing you need to do.

Does this apply to fixed tariffs?

Yes. The VAT cut applies to all domestic electricity tariffs, including fixed, standard variable, and green tariffs.

Will my bill definitely go down by £45?

Not necessarily. £45 is the Government's estimate for a typical home over a year. Your saving depends on how much electricity you use. It's also worth knowing that Ofgem's price cap changes on the same day, which could affect your overall bill separately from the VAT cut.

Will my Direct Debit be reviewed because of the VAT cut?

The VAT cut alone works out at around £3.75 a month, which wouldn't usually be enough to change your Direct Debit. We do review Direct Debit amounts regularly, especially around price cap changes, so if yours is reviewed around 1 October, the price cap update is the more likely reason.

What if I'm struggling to pay my energy bills?

We're here to help. Get in touch and we can talk through options like payment plans and extra support, including our Priority Services Register.

Footnotes

1. The £45 annual saving is the Government's estimate for a typical home.  Actual savings depend on individual electricity use.  
2. £45 a year works out to around £3.75 a month, based on the Government's estimate for a typical home. Actual savings depend on individual electricity use.
3. The Government announced an estimated £150 average reduction in the November 2025 Budget. Ofgem confirmed this as a £117 average reduction when it updated the price cap for April 2026.