Electricity bills that span 1 October: splitting the VAT

A communal electricity bill that runs across 1 October 2026 will usually show two VAT rates on a qualifying supply: 5% for electricity used up to 30 September and 0% for electricity used from 1 October. HMRC lets suppliers split the bill by when the electricity was used, ideally from meter readings, or by another method that gives a fair and reasonable result, such as a split by days.

Why does my bill show two VAT rates?

From 1 October 2026 to 31 March 2027, electricity for qualifying use in England, Wales and Scotland is zero rated. The change is made by SI 2026/987 and explained in Revenue and Customs Brief 10 (2026). Before 1 October the same supplies were charged at 5%.

So on a qualifying supply, a bill covering September and October will usually show two VAT lines, one at 5% and one at 0%. Suppliers have some freedom under the time of supply rules in section 88 of the VAT Act 1994, so a spanning bill with a single rate is worth a closer look before you post it.

The change covers electricity only. Northern Ireland stays at 5%, and gas and heat stay at 5% everywhere.

Communal supplies to residential blocks qualify. HMRC treats power for the common parts of a block of flats, such as corridors, lifts and stairways, as domestic use whatever the amount (VAT Notice 701/19 §10.4). Our guide to VAT on communal electricity covers which supplies qualify in more detail.

How should the split be worked out?

Brief 10 lets suppliers split a spanning bill by when the electricity was used. A meter reading on or close to 30 September is the best evidence. Brief 10 also says: “Other methods may be used if they produce a fair and reasonable outcome.”

The two common methods:

• By meter reading: electricity used up to the reading takes the old rate, and electricity used after it takes the new one.

• By days: the charges are shared in proportion to the days before and after 1 October.

Whichever method is used, the two parts should add up to the net charges on the bill, and the VAT on each part should match its rate.

What does a split look like in practice?

Here is an example with invented, round numbers. Kingsway House is a fictional residential block in England. Its landlord supply comes from Lumenvale Energy, also fictional, and the bill covers 1 September to 30 November 2026.

• Billing period: 91 days, of which 30 fall in September and 61 fall on or after 1 October.

• Consumption: 4,550 kWh.

• Net charges: £910. To keep the sums simple, the example uses one all-in price of 20p per kWh.

Split by days

• 1 to 30 September: 30/91 of £910 is £300 net. VAT at 5% is £15.

• 1 October to 30 November: 61/91 of £910 is £610 net. VAT at 0% is £0.

• Bill total: £910 net plus £15 VAT, so £925.

Split by meter reading

Now suppose a reading on 30 September showed 1,400 kWh used in September and 3,150 kWh from 1 October, because the common parts lighting was on for longer as the evenings drew in.

• 1 to 30 September: 1,400 kWh at 20p is £280 net. VAT at 5% is £14.

• 1 October to 30 November: 3,150 kWh at 20p is £630 net. VAT at 0% is £0.

• Bill total: £910 net plus £14 VAT, so £924.

Both are reasonable splits. What matters is that the bill uses one method and the sums agree.

What if there’s no meter reading on 30 September?

Then a split by days is the usual fallback. For earlier rate changes, HMRC’s VAT Fuel and Power manual (VFUP3100) accepted a meter reading first, then the number of days before and after the change, or days weighted for seasonal use. Weighting suits supplies that use more in winter, such as lighting or heating plant.

What if the bill shows 5% after 1 October?

For a qualifying supply in England, Wales or Scotland, 5% on electricity used from 1 October is worth asking your supplier about. The rules on what qualifies have not changed, so a supply that was correctly at 5% before 1 October would normally be at 0% during the window.

Two cases where 5% is expected: a block in Northern Ireland, and a gas or heat bill.

What if the whole bill is at 20%?

Then the question is whether the supply qualifies. Power for the common parts, lifts, pumps and plant of a purely residential block qualifies whatever the usage (Notice 701/19 §10.4; VFUP2330). HMRC’s limit of 33 kWh a day only matters for mixed-use buildings, supplies used outside a building, such as estate lighting, and supplies bought by someone other than the landlord or RMC.

HMRC’s manual notes that many suppliers charge 20% to a new non-domestic customer unless they hold a VAT declaration (VFUP2530). If a residential supply is billed at 20%, it is worth asking your supplier; the client, as account holder, would usually sign the declaration. Check for Climate Change Levy too, which does not apply to domestic use. On the example bill above, 20% throughout would mean £182 of VAT.

Correcting earlier bills is at the supplier’s discretion, and the supplier’s own claim to HMRC is limited to four years (section 80 of the VAT Act 1994). On most residential blocks the VAT on communal electricity can’t be recovered, so it ends up in the service charge.

What happens at 31 March 2027?

The zero rate ends on 31 March 2027 unless it is extended. Bills that span that date need the reverse split: 0% for electricity used up to 31 March and 5% from 1 April. The same methods apply. Check gov.uk for any extension before the spring bills arrive.

How should accruals and budgets handle it?

• Accruals for electricity used and not yet billed need the right rate on each side of 1 October, and later of 31 March.

• Estimated bills that span either date need the same care. Record that the read is estimated, because the split may move when the actual read arrives.

• Next year’s budgets should assume 5% from 1 April 2027 unless the rate is extended. Check gov.uk for any extension.

• A service charge year that straddles the window will show a one-off drop in VAT on electricity. It is worth a line in the accounts or the covering letter to leaseholders.

Checklist for bills that span a rate change

1. Confirm the bill is for qualifying electricity in Great Britain, and that it shows two rates.

2. Note the method used, by meter reading or by days, and check the two parts add up to the net charges.

3. Check the VAT on each part: 5% up to 30 September, 0% from 1 October.

4. Query 5% after 1 October, or 20% at any point, on a qualifying supply.

5. Check whether Climate Change Levy is charged on a qualifying supply.

6. Use the right rate on each side for accruals, and assume 5% from 1 April 2027 in next year’s budget.

For the checks that apply to every utility bill, see our utility invoice validation checks.

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Dataforge Invoices reads electricity, gas and water bills and takes the current charges. It reads the supply address, meter, period and consumption, checks VAT and Climate Change Levy, and codes each bill to the property, fund and heading. Anything uncertain goes to your team with the reason named.