VAT on electricity bills, and what the holiday does to solar
There is no VAT on domestic electricity in Great Britain until 31 March 2027. It makes your bill cheaper and it makes solar look worse — and on 1 April 2027 both reverse on the same day the relief on installing solar ends. Almost nobody is joining those two up.
No VAT on electricity in Great Britain until 31 March 2027.
Then, on 1 April 2027, it returns to 5% — the same day the zero rate on installing solar and batteries also ends. One of those changes makes solar more attractive and the other makes it less, and they land together.
The facts, with their dates
The eligibility rules did not change. What qualified for the 5% reduced rate qualifies for the zero rate: electricity for domestic use, or a charity’s non-business use.
What it did to the price cap
This is the part worth slowing down for, because the headline is misleading in both directions.
| 1 Jul – 30 Sep 2026 | 1 Oct – 31 Dec 2026 | |
|---|---|---|
| Electricity unit rate | 26.11p | 26.32p |
| Daily standing charge | 57.19p | 54.83p |
| VAT included | 5% | none |
| Unit rate before tax | 24.87p | 26.32p |
The headline rate rose 0.8%. The price before tax rose 5.8%.
Removing VAT absorbed most of an underlying increase. Ofgem says as much itself: the current period’s costs cannot be compared directly with previous ones. A household looking only at the pence-per-kWh on its bill would conclude that wholesale conditions were roughly flat. They were not.
If the price before tax stays exactly where it is, VAT returning at 5% takes the unit rate from 26.32p to 27.64p overnight — a 5% rise with nothing behind it but the tax.
Nobody should treat that as a forecast of what the cap will do; the cap moves every three months for its own reasons. But the tax component is known, scheduled, and in the opposite direction to everything else on the bill.
Why this makes solar look worse, briefly
Solar earns in two ways, and the big one is avoiding electricity you would otherwise buy — see self-consumption. A unit you use is worth your import price. Lower the import price and you lower the saving.
So the VAT holiday makes every payback figure on this site slightly worse than it would have been. We have updated them accordingly, because reporting a better number than the data supports is the thing we exist not to do.
The effect is small — the headline rate barely moved — and it is temporary.
And why today’s rate understates the long-run case
Here is the part that cuts the other way, and it matters more.
Every payback calculation on this site holds today’s electricity price flat for twenty-five years. We do that deliberately: assuming price rises makes solar look better and turns a calculation into a forecast.
But today’s price has a tax holiday in it that expires in March. Holding it flat is no longer a neutral assumption — it is a conservative one, because we know the tax component returns on a published date. A household running our payback numbers is being given an answer built on the cheapest electricity of the next few years.
We are not going to adjust for it. Building an expected tax change into a payback figure is forecasting, and we said we would not. But you should know the assumption is now leaning against solar rather than sitting neutral.
The two reliefs, side by side
| Electricity you buy | Installing solar or a battery | |
|---|---|---|
| Rate now | 0% | 0% |
| Started | 1 October 2026 | 1 April 2022 (solar), 1 February 2024 (batteries) |
| Ends | 31 March 2027 | 31 March 2027 |
| Then | 5% | 5% |
| Where | Great Britain only | UK-wide |
| Effect on the case for solar | Makes it worse while it lasts | Makes it better while it lasts |
Both expire on the same day, and they pull in opposite directions.
If you are installing before 31 March 2027, you get the cheaper installation, and your system then meets a higher import price from April — which is the better side of both.
If you install after, the equipment costs 5% more and the electricity it displaces costs 5% more. Those partly offset; they do not cancel, because the import price compounds over twenty-five years and the installation cost is paid once.
Expect the deadline to appear in sales material. “Get it done before the VAT goes up” will be a line this winter, and unlike most such lines it points at a real published date.
It is still a reason to plan rather than to rush. A 5% difference on the installation is worth having and is smaller than the spread between three quotes on the same roof — see cost per kW. A hurried decision at a bad price loses more than the deadline saves.
What it does not change
Your export payments. The relief concerns electricity supplied to you. A domestic generator being paid under the SEG is not charging VAT on that, and we have found no guidance suggesting the zero rate touches it.
Gas. Unchanged at 5% everywhere, which slightly widens the gap between running a heat pump and running a boiler for the duration — though not by enough to decide anything on its own.
Northern Ireland. Electricity there stays at the 5% reduced rate. Every figure on this page describing the zero rate is Great Britain only; the cap rates we quote are a GB average.
The standing charge. It fell, from 57.19p a day to 54.83p. That is a separate change and not a consequence of the VAT measure.
Sources
- Temporary zero rate of VAT in Great Britain for domestic electricity Policy paper, published 8 September 2026. The measure was announced on 21 July 2026.
- Revenue and Customs Brief 10 (2026): Temporary zero rate of VAT for domestic electricity in Great Britain Published 8 September 2026. The dates, the Northern Ireland position, and how suppliers apportion a bill spanning 1 October.
- The Value Added Tax (Supplies of Domestic Electricity) Order 2026 SI 2026/987. Cited by link: we never mirror legislation.gov.uk, because it serves point-in-time versions that a static copy cannot.
- Energy price cap unit rates and standing charges
- Energy-saving materials and heating equipment (VAT Notice 708/6)
Contains public sector information licensed under the Open Government Licence v3.0.
Sorry to hear that. What was the problem?