Is VAT coming off electricity in October? Yes — and a price cap lands too.

Is VAT being removed from electricity bills?

VAT on domestic electricity drops from 5% to 0% on 1 October 2026. It's a temporary measure, running six months until 31 March 2027. The government expects it to save a typical household around £45 a year, and suppliers are expected to pass it on in full — including to people on fixed tariffs.

Two details worth knowing:

• It applies to electricity only. On a dual-fuel bill, the gas half doesn't change.
• It covers Great Britain. Northern Ireland is excluded under post-Brexit VAT rules, with equivalent funding provided instead.

Now confirmed: the new price cap

Ofgem confirmed the October price cap on 26 August. It rises 4% to £1,723 a year for a household on typical use, up £60 from today's £1,663, and it starts on 1 October alongside the VAT change.

The important detail for anyone with solar, a battery or a heat pump: the rise is almost entirely gas. Gas goes up around 8%. Electricity stays broadly flat, because the VAT cut lands the same day and absorbs most of it — Ofgem put that at around £45, the same figure quoted above. Homes with no gas supply at all see a rise of under 1%.

The bit nobody else will tell you

Here's the honest installer's take: cheaper electricity slightly reduces what solar saves you. Solar's value comes from the grid electricity you no longer buy — so if that electricity gets cheaper, each unit you generate is worth a little less.

You won't read that on a solar company's website very often. But three things sit alongside it:

• It's six months, not forever. The VAT relief ends 31 March 2027 and the rate returns to 5%.
• The cap rises on the same day, which pushes in the opposite direction — the two changes largely cancel out on the electricity side.
• Export payments are unaffected. What you're paid for solar you send back to the grid doesn't change because of this.

Net effect on a typical Essex payback calculation: small. Not nothing, but nowhere near enough to change whether solar makes sense for your roof. If anyone tells you this is a reason to rush or to wait, treat that as a sales line rather than arithmetic.

The deadline that actually matters

There's a second VAT date, and it's easy to muddle with the first. Solar panels, batteries and heat pumps currently carry 0% VAT on installation — that relief is also scheduled to end on 31 March 2027, reverting to 5% unless the government extends it. Same date, completely different thing, and on a typical system it's worth far more than £45 a year. The detail is in our 0% VAT guide.

What we'd suggest

Nothing dramatic. If solar was already on your list, neither change should push you either way — but the install-VAT deadline is a real, published date worth planning around. If you'd like the actual numbers for your roof rather than national averages, our free design comes back within 24 hours across Chelmsford, Romford and the rest of Essex, with what a system costs set out in our pricing guide.

Facts checked against government and Ofgem sources on the date below. Published: 21 August 2026. Updated 26 August 2026 with the confirmed Ofgem price cap.