VAT on business gas and electric bills
How much is VAT on electricity for business?
The VAT rate on business electricity bills is usually 20%. However, the government offers a discounted rate of 5% for businesses that use a limited amount of electricity in order to promote energy efficiency and help hit national targets. This also applies to charities and non-profit organisations.
Who qualifies for discounted VAT on business energy?
If you use less than 33 kWh of gas per day, 1,000 kWh per month or 12,000 kWh a year, your supplier should automatically put you on this de minimis rate of VAT on business electricity bills.
The lower VAT rate should be applied automatically, but it’s always worth checking your bill and making sure. If you qualify for the discounted rate of VAT on electricity bills for business but you’re still being charged the higher rate, get in touch with your supplier.
How much is VAT on gas for business?
VAT on business gas is also charged at 20%, but there is an opportunity to pay the discounted rate of 5%. To be eligible for the lower rate of VAT on gas for business, you’ll need to use less than 145 kWh of gas per day. Over one month, this equates to 4,397 kWh of gas, while over a year it equals 52,764 kWh.
To work out whether or not you can access the lower rate for VAT on gas, check your recent business gas bill and compare your consumption rates with those mentioned. As with VAT on electricity for business, be sure to check your bill and make sure you aren’t being charged the full rate. If you are, get in touch with your supplier.
How do I know how much VAT my business is paying for energy?
The easiest way to see how much business electricity and gas VAT you're paying is to look at your bill and see how much you're being charged. It could be in a less obvious line item, so read the bill carefully.
Remember that it might not be applied to the whole bill, especially if you're on a mixed-use deal where only certain parts of your business are charged the full rate.
VAT on recharged energy bills (via landlord or managing agent)
What does “recharged utilities” mean?
Recharged utilities are energy costs billed to the landlord or managing agent of your business premises and then passed on to you via service charges or other invoices.
The VAT calculation process is the same regardless of whether it is recharged or not. You should still be eligible for de minimis VAT if the business qualifies.
How to check your recharged business energy bill
If you get recharged utilities, make sure any documents or bills you're sent include the following with regard to VAT:
- A VAT breakdown which includes the amount and the rate
- How the amount was calculated
- The period the recharge covers.
What to do if you think your recharged business energy VAT is wrong
The first thing to do is contact your landlord or managing agent to double-check. Keep hold of invoices and take meter photos in case the situation needs to be escalated to your accountant or HMRC.
Can my business claim back the VAT on business energy?
If your business is VAT-registered, you should be able to claim back the VAT as input tax on your business expenses, subject to the normal rules on VAT deduction. This applies whether you're paying the 20% rate or the 5% rate.
To find out how much tax your business can claim back, go to the HMRC website. Make sure you keep any documents or evidence that could be helpful in making your claim.
It’s also worth knowing that you don’t pay VAT on council tax, wages and a host of other expenses that are outside the scope of VAT.
What is the VAT rate on energy for microbusinesses?
There’s no special VAT rate for microbusinesses by default - it’s still driven by eligibility and usage thresholds. If you run a microbusiness, you can still be eligible for the discounted VAT rate on electricity and gas, as long as you use no more than the de minimis levels.
Similarly, if you run your business from home, then you’ll pay the discounted 5% rate - which is the same rate of VAT on energy bills UK households pay - so long as you don’t go over the de minimis thresholds.
You can see how much an average VAT bill might be below.
How much is VAT on an average 2026 business electricity bill?
| Business size | Average annual business electricity bill | VAT at 5% rate | VAT at 20% rate |
|---|---|---|---|
| Microbusiness | £2,700 (based on annual usage of 10,000 kWh) | £135 | £540 |
| Small business | £4,986 (based on annual usage of 20,000 kWh) | £249.30 | £997.20 |
| Medium business | £9,294 (based on annual usage of 40,000 kWh) | £464.70 | £1,858.80 |
| Large business | £12,930 (based on annual usage of 55,000 kWh) | £646.50 | £2,586 |
Note: Prices are correct as of March 2026. Rates and bill size may vary according to your meter type and business location. The prices you’re quoted may be different from the averages shown. The figures shown are the average unit rates and standing charges received by Bionic from our panel of suppliers from March 1 to March 6, 2026.
How much is VAT on an average 2026 business gas bill?
| Business size | Average annual business gas bill | VAT at 5% rate | VAT at 20% rate |
|---|---|---|---|
| Microbusiness | £766 (based on annual usage of 10,000 kWh) | £38.30 | £153.20 |
| Small business | £1,415 (based on annual usage of 22,500 kWh) | £70.75 | £283 |
| Medium business | £2,664 (based on annual usage of 47,500 kWh) | £133.20 | £532.80 |
| Large business | £3,589 (based on annual usage of 65,000 kWh) | £179.40 | £717.80 |
Note: Prices are correct as of March 2026. Rates and bill size may vary according to your meter type and business location. The prices you’re quoted may be different from the averages shown. The figures shown are the average unit rates and standing charges received by Bionic from our panel of suppliers from March 1 to March 6, 2026.
Could my business pay reduced VAT on energy bills?
In addition to the de minimis level of energy consumption, there are other situations where you may pay reduced VAT on gas and electric bills. These include:
- At least 60% of your business’s energy is used as household energy
- Your business is a charity or not-for-profit organisation
- Business premises that are also the place of residence for 90% of the people inside, such as student accommodation, places of rehabilitation and care homes
- Places of business that are also your home
- Self-catering holiday accommodation
- Free schools and educational academies
- Places of worship, such as nunneries and monasteries.
Your business may only partly qualify for the reduced rate. If this is the case, your business may be better suited to a ‘mixed use’ deal. This allows your business to pay a lower rate on the parts of your business which qualify, while the rest pays the standard 20% charge. To qualify, you’ll need to discuss this with your provider or the energy expert responsible for your price comparison.
Can claims for business VAT be backdated?
If you think you’ve been paying more VAT on business gas and electricity than you should have been, then you can make a backdated claim for up to four years’ payments. You should:
- Check your eligibility if you think you should be charged 5% rather then 20%
- Gather evidence, such as bills and photos showing your usage on your meters
- Fill in a VAT Declaration Form.
If you do get a refund, this will be for the difference between the discounted and standard rates of VAT for the period you’re claiming for.
Does the Climate Change Levy (CCL) affect VAT on business energy bills?
The Climate Change Levy is separate to VAT, so you may see both on your business energy bill.
In 2001 the government introduced the Climate Change Programme, designed to lower emissions nationwide. A big part of this is the Climate Change Levy (CCL), which offers businesses another chance to lower their energy spend.
If your usage is under the de minimis level for VAT on gas and electricity, or your business premises are eligible for a VAT discount, you'll likely be exempt from paying the main rates of CCL. If not, you can sign a Climate Change Agreement (CCA) to potentially get a discount of up to 90%. However, by signing a CCA, you agree to make improvements to your energy efficiency, thereby reducing your average consumption.
How do I apply for a lower business energy VAT rate?
Your energy supplier can give you a VAT Declaration form which you can use to claim a rebate on your VAT payments from the previous four years. You may need to provide:
- Business details and premises address
- Relevant evidence, such as your usage details
- Bill examples and/or meter data where relevant.
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FAQs
Why has my landlord charged 20% VAT on energy?
Your landlord has probably charged 20% VAT on your business energy because they think that's the rate you should be paying. If you think it should be lower, follow the steps listed above to let them know and make a claim to HMRC.
What’s the difference between sub-metered and allocated recharges?
If you're a tenant in a building that houses multiple businesses using a sub-meter, your energy usage will be precisely calculated. An allocated recharge calculates your share of a building's total utility bill based on factors like the square footage of your area or a formula, so it can be less precise than sub-metering.
Can I reclaim VAT if the invoice isn’t in my business’s name?
In theory, yes, but you will probably have to provide evidence that proves that (for example) the business and the person whose name is on the invoice are linked, and that the invoice is for business-related purposes.
Who do I contact if the VAT on my energy looks wrong?
If you think you're paying the wrong VAT rate for your business energy, get in touch with your landlord or managing agent and then, if necessary, HMRC.