Temporary VAT Reduction on Electricity: Frequently Asked Questions

The UK Government has announced a temporary reduction in VAT on certain electricity supplies from 1 October 2026, until 31 March 2027.

This change may affect some Valda Energy customers, so we've put together these frequently asked questions to explain what it means and whether it could apply to your business.

What is changing?

From 1 October 2026, the VAT rate on eligible electricity supplies will be reduced from 5% to 0% for a temporary period.

The reduction applies to:

• Domestic electricity supplies.
• Non-domestic electricity supplies where electricity consumption is 1,000 kWh or less during a monthly billing period.
• Customers who already qualify for reduced-rate VAT under existing HMRC rules.

What does the 1,000 kWh threshold mean?

Under HMRC rules, a business may qualify for reduced-rate VAT if its electricity consumption does not exceed 1,000 kWh within a monthly billing period.

This is known as the de minimis limit.

If your electricity consumption is 1,000 kWh or less in a billing month, the reduced VAT treatment can apply regardless of the type of business or premises.

If your consumption exceeds 1,000 kWh during the monthly billing period, the standard VAT treatment will continue to apply unless you already qualify for relief under existing HMRC rules.

Do I need to do anything?

No.

If you are eligible for the temporary VAT reduction, we will apply the revised VAT rate automatically. There is no application process and no action is required from you.

 How will the change be applied to my bill?

Eligible customers will see a VAT rate of 0% applied to qualifying electricity consumption from 1 October 2026.

To calculate the change from the effective date:

• We will use an actual meter reading where one is available.
• If no actual reading is available, we will estimate your usage based on available smart meter data or your Estimated Annual Consumption (EAC).

This ensures the correct VAT treatment is applied to electricity used before and after 1 October 2026.

Does this change apply to gas?

No.

This temporary VAT reduction applies to electricity supplies only. VAT treatment for gas supplies remains unchanged unless the Government announces any further changes.

Where can I find more information?

Further information about VAT relief on energy supplies can be found on the HMRC website:

https://www.gov.uk/vat-charities/what-qualifies-for-relief