VAT cut on energy bills: what it means for you

The government has cut VAT on household electricity prices from 1 October 2026 to help with the cost of living.

If you’re an OVO customer, you’ll get the saving automatically, whether you’re on a standard variable or fixed rate tariff. You don’t have to do anything.

VAT on energy bills changed on 1 October

VAT on household electricity prices dropped from 5% to 0% on 1 October 2026 for both standard variable and fixed-rate tariffs. All suppliers will pass the savings on to all customers automatically.

The government estimates that will take around £45 off energy costs over a year for the average customer¹. Though how much you actually save will depend on how much electricity you use.

If you’re an OVO customer, you don’t need to do anything. There’s no need to contact us or change your tariff. We’ve automatically removed VAT from your electricity prices.

The VAT cut is only for electricity, not gas

From 1 October 2026, VAT on energy prices is 0% for electricity and 5% for gas.

If you get both gas and electricity from the same supplier, you’ll only see the VAT saving on the electricity part of your bill.

All homes are eligible for reduced VAT on energy prices

The VAT cut applies to all domestic electricity tariffs, whether you’re on a fixed or standard variable tariff, and whether you’re a new or existing customer. The VAT cut applies in England, Scotland and Wales.

The government expects all energy suppliers to pass the VAT reduction on to all customers. If you’re with OVO, we’ve automatically removed VAT from your electricity prices from 1 October 2026.

The VAT cut applies in England, Scotland and Wales. Northern Ireland is different – EU VAT rules will still apply under the terms of the UK leaving the EU. Instead, the Northern Ireland Executive will receive similar funding to support households.

You could save around £45 a year

The government estimates that will take around £45 off energy costs over a year for the average customer¹. This is an estimate based on average household usage, so your actual saving will vary depending on your home's electricity use.

The 5% reduction is applied to both the daily standing charge and unit rate (per kWh). 

How the VAT cut works with the price cap

The energy price cap changed on 1 October 2026, the same day VAT on electricity prices dropped to 0%.

The VAT cut means you’ll pay less than you would have without it. It doesn’t guarantee that your bill will be lower overall.

How the VAT cut will appear on your OVO bill

Costs for electricity use from 1 October 2026 will be charged at 0% VAT and won't appear on the VAT line of your bill.

You don’t have to do anything

Suppliers automatically removed electricity VAT from customers’ electricity prices from 1 October 2026. 

If you’re with OVO, we’ve removed electricity VAT automatically from 1 October 2026. 

What happens after the VAT cut ends

No end date has been set yet. We’ll update this page as soon as the government shares any news.

Get a quote with OVO

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Your quote shows 5% VAT on gas and 0% VAT on electricity. Just keep in mind that 5% VAT still applies to your electricity until 30 September 2026. Your 0% VAT rate will kick in automatically on 1 October 2026.

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Sources

GOV.UK: government cuts tax on household electricity bills

¹ Based on a customer paying by Direct Debit using Ofgem’s Typical Domestic Consumption Values for a medium customer use (9,500 kWh for gas and 2,500 kWh for electricity). This will vary based on actual household use.