Electricity VAT to be scrapped for six months from 1 October

QrizB

How many coffee's do you get out of a jar?

Nescafé think 166 coffees from a 300g jar (it's printed on the cardboard tray in my photo) which is near-as the same as bristolleedsfan's 55 per 100g.

Ildhund

Being serious for a moment, can anyone foresee or guess or find out what effect removing 5% VAT on domestic electricity will have on the Warm Home Discount? This is mandated to amount to £150 including VAT.

My supplier has had fun trying to account for this over the years, but now - when trying to find out just how much VAT I've paid - I see that for the past three years, the VAT has been negative each November, reduced by the £7.14 VAT on the WHD. Perhaps we should open a book on the net benefit to recipients this coming winter; I'm willing to bet that not all suppliers will do it the same,

From §3.(1) of the Regulations:

“prescribed rebate” means a rebate of £150;

and from §11.:

(3) The scheme electricity supplier must provide the prescribed rebate to a core group customer
by—
(a) crediting to the customer’s electricity account an amount as a result of which the amount
(including Value Added Tax) charged to the customer is reduced by the amount of the
prescribed rebate,

with all sorts of variations which don't change the basic fact that the WHD has for the past three years been £142.86 + VAT.

Scot_39

Not being flippant - but why should that component on a bill change - when for many - the c85% - the gas component VAT will not.

It's like a supermarket - many of the goods are zero rated - others are not - changing the VAT (as it has from 15% to 20% in my working life) - doesn't change the zero rated goods costs. But it does the VAT entered on an expenses form from the total.

@Ildhund - can you confirm my long held suspicions - given your examining the docs - that the cost of the WHD (MSE esitmated about £46 iirc for duel fuel cap before the move to unit rates) is built into the top line for every user - or does it in some way not get applied to the costs for those on WHD ?

And do you happen to know the new rates /kWh for those costs since Apr move to unit not SC presumably before

What about another one - solar export ?

And never having looked at a bill for it - what about solar export rates as well - do they get VAT factored in in some way ? So when Octopus say 12p - is that going to change - or is the deduction only on electricity import ?

QrizB

What about another one - solar export? And never having looked at a bill for it - what about solar export rates as well - do they get VAT factored in in some way? So when Octopus say 12p - is that going to change - or is the deduction only on electricity import?

I've just double-checked my bill and the 12p/kWh I am paid for solar export has 0% VAT shown.

Here's an excerpt:

Commercial users might see VAT as part of their export credits, but I'm not able to check that.

Scot_39

Thanks QRizB

Edit : Hopefully that means they can handle different vat rates on other items on the bills too - so the gas vs electric for many.

And otyher specials - like the WHD question above.

MWT

https://forums.moneysavingexpert.com/discussion/comment/82079295#Comment_82079295

In a similar vein, DD payments made to an account before the tax point for the change will incur VAT at the 5% rate… (tax point is the earlier of the payment or the bill)

Most supplier do not make this clear as they simply add the payment to the balance inc.VAT, but some like BG remove the VAT and store the net value in the balance and then apply that to the ex-VAT cost each month before adding the VAT.

The BG approach just works correctly through any VAT changes, for the other suppliers it is going to be more interesting…

Different VAT rates for gas/electricity is also going to make things interesting on combined accounts…

debitcardmayhem

https://forums.moneysavingexpert.com/discussion/comment/82079456#Comment_82079456

Well Octopus give separate bills for everything, so no worries there

Ildhund

@Scot_39 asked:

… can you confirm my long held suspicions - given your examining the docs - that the cost of the WHD (MSE esitmated about £46 iirc for duel fuel cap before the move to unit rates) is built into the top line for every user - or does it in some way not get applied to the costs for those on WHD ?

And do you happen to know the new rates /kWh for those costs since Apr move to unit not SC presumably before

I can't see any indication of different treatment tariff-wise for those in receipt of WHD, and I'm not sure how that could be achieved anyway. It's up to Ofgem how they distribute policy costs between unit rates and standing charges as far as the price cap is concerned, but suppliers can make their own choice for tariffs other than the SVT.

I'll tack on two relevant bits from Ofgem's phenomenally complicated analysis of the costs. My best bet is that the £22.92 levied annually per customer until 31/03/2026 translates to 0.5010p/kWh elec. and 0.1810p/kWh gas from 01/04/2026. I hope I got the decimal points in the right place.

Extracted from table 2a Aggregate costs in
Policy-cost-allowance-methodology-Annex-4-July-September-2026.xlsx

The changes in the RO and ECO levies between Q1 and Q2 2026 are fairly obvious. The change in the WHD levy not so, which is why I've also added the next table.

Extracted from table 3f WHD in
Policy-cost-allowance-methodology-Annex-4-July-September-2026.xlsx

Using current TDCVs, WHD costs the typical dual-fuel household
( 2700 x 0.5010/100 = £13.53)
+
(11500 x 0.1810/100 = £20.82)
=
£34.34 p.a. (+ VAT £1.72 = £36.06 😐)

Scot_39

Thanks for digging out those tables @Ildhund

Do you maybe not still have to add 3.41+vat as in the /customer and whd/customer lines wherever old 22.92 was. Although its not clear why only 3.41 - they maybe treat /customer as /fuel in bottom table

Suggesting not 100% was moved to unit rates

Adding another £7.16 inc vat to duel fuel total.

So £43.22.

And lower at new July tdcvs unless rates sc offset 3.41 tweaked.

Bit closer to old £22.92x2+vat = £48.13

Edit

Opened up the spreadsheet - it crashed my open office when 1st tried - I think the new note I see - means the plan is to remove the final £3.41 from SC - from Apr 27.

Ildhund

Sorry, @Scot_39, I got waylaid.

I think it's more likely that
Total cost 1,174,834,854 ÷ 51,267,952 = £22.92/customer for 2025/2026.

Total cost £1,174,834,854 exceeds the budget for 2025/2026 by £174,834,854.
174,834,854 ÷ 51,267,952 = £3.41/customer to be recouped in 2026/2027.

Budget for 2026/2027 £976,000,000, to be split equally between electricity and gas customers:
488,000,000 ÷ 97,479,143 = £5.0062/MWh elec. (0.501p/kWh)
488,000,000 ÷ 269,086,902 = £1.8135/MWh gas.(0.181p/kWh)

I'm sure the rationale for the 50/50 split is given somewhere in all the documentation.