Tag Archives: VAT-fuel-power

VAT: New zero rate for domestic electricity

By   27 July 2026
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The government has announced that the VAT rate for domestic electricity will be reduced from 5% to zero from 1 October 2026 in advance of winter costs.

It is stated that the government  expects that suppliers will pass the VAT reduction on to their customers (including those on fixed tariffs).

The VAT cut, from 5% to 0%, is estimated to reduce  CPI inflation by around 0.10 percentage points and RPI by around 0.14 percentage points.

This action is estimated to cost  around £850 million in 2026-27 on the basis of estimated electricity prices and will be funded by the cancellation of the Digital ID programme.

 

VAT – Fuel and power guidance updated

By   11 February 2025
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HMRC has updated its notice Updated its Notice 701/19: Fuel and power.

The Notice explains how suppliers and users should treat supplies of fuel and power for VAT purposes and it sets out how to treat a number of other supplies connected with fuel and power.

The update provides more detail of supplies for domestic use.

Supplies of fuel and power for domestic use are eligible for the reduced rate of 5%.

The provider must be certain that the supply is to a dwelling or certain types of residential accommodation. Examples of allowed residential accommodation are:

  • armed forces residential accommodation
  • caravans
  • children’s homes
  • homes providing care for the elderly or disabled, people with a past or present dependence on alcohol or drugs or people with a past or present mental disorder
  • houseboats
  • houses, flats or other dwellings
  • hospices
  • institutions that are the sole or main residence of at least 90% of their residents
  • monasteries, nunneries and similar religious communities
  • school and university residential accommodation for students or pupils
  • self catering holiday accommodation

The following buildings are not considered residential accommodation for the purposes of fuel and power:

  • hospitals
  • prisons or similar establishments
  • hotels, inns or similar establishments