The UK’s new Prime Min­is­ter, Andy Burn­ham, has wast­ed no time mak­ing new tax poli­cies since tak­ing office, hav­ing announced a tax cut to remove VAT from domes­tic elec­tric­i­ty bills from 1 Octo­ber. While this mea­sure is pri­mar­i­ly tar­get­ed at house­holds, some small­er busi­ness­es will, impor­tant­ly, also be eli­gi­ble for relief.

What’s chang­ing?

From 1 Octo­ber 2026, the rate of VAT on domes­tic elec­tric­i­ty bills will be cut from 5% to 0%, a move that is expect­ed to save house­holds some £45 per year. This rate cut will apply to house­holds in Eng­land, Wales, and Scot­land, with com­pa­ra­ble fund­ing to be pro­vid­ed to the North­ern Ire­land Exec­u­tive to pro­vide cost-of-liv­ing sup­port to NI house­holds.

All sup­pli­ers are expect­ed to pass the VAT reduc­tion on to all cus­tomers, includ­ing those on fixed tar­iffs, as they did with the £150 of costs tak­en off ener­gy bills announced at the last Bud­get.

As part of the announce­ment, the Gov­ern­ment con­firmed that small busi­ness­es who qual­i­fy for the domes­tic ener­gy VAT relief and are not reg­is­tered for VAT, as well as char­i­ties and res­i­den­tial care homes eli­gi­ble for the reduced rate, will also ben­e­fit from this mea­sure.

Tem­po­rary relief, or not?

So far, this mea­sure is only fund­ed from 1 Octo­ber 2026 to the end of this finan­cial year (31 March 2027). Any fur­ther action, includ­ing on fund­ing for longer-term mea­sures, will be tak­en at the next Bud­get.

Does your busi­ness qual­i­fy?

Unsure of whether your small busi­ness qual­i­fies for elec­tric­i­ty bill relief, or inter­est­ed in hear­ing about oth­er ways that your busi­ness can save on costs? Speak to a mem­ber of Russell+Russell today to find out more.