From 1 October 2026, VAT on household electricity falls from 5% to zero. Ofgem’s price cap announcement says “the government has decided to reduce the level of VAT from all electricity bills from 5% to zero … from 1 October 2026 to 31 March 2027” (Ofgem). Gas still carries VAT.
That doesn’t make electricity cheaper per kWh. The GB average price cap unit rate for Direct Debit customers goes from 26.11p per kWh (July to September, with 5% VAT) to 26.32p (October to December, with no VAT). The standing charge falls from 57.19p to 54.83p a day (Ofgem). By our arithmetic, the underlying (pre-VAT) unit rate rose by about 1.45p per kWh, and the VAT cut absorbed most of that rise. Without the cut, the new unit rate would have been around 27.64p.
What it means for plug-in solar. A plug-in kit saves you the unit rate on each kWh you use from it. The standing charge doesn’t change. So the value of your solar is roughly the same this quarter, up slightly. Rates vary by region, from 25.36p in the East Midlands to 27.86p in Merseyside and Northern Wales.
Two things to watch:
- The cut is temporary. If VAT returns at 5% in April 2027 and nothing else changes, each kWh your kit saves will be worth 5% more. Longer-term payback estimates depend on prices we can’t predict.
- Northern Ireland isn’t covered by the Ofgem price cap.
Our calculator uses the October to December rates for each region. See is plug-in solar worth it? for payback at your postcode.