What the New Electricity Bill Tax Cut Means for Small Businesses
Running a business means keeping an eye on every penny, so any announcement about taxes or energy bills is bound to grab your attention.
One of the first announcements from the new Prime Minister is the removal of VAT from domestic electricity bills from 1 October 2026. While it’s mainly aimed at helping households with the cost of living, there are a few things business owners should know too.
Households will save money this winter
From 1 October, VAT will be removed from domestic electricity bills for this financial year.
For the average household, that’s expected to reduce annual electricity costs by around £145, helping to ease the pressure of rising living costs over the winter months.
If you’re a business owner, that might not directly affect your business finances, but it could mean a little extra breathing room in your personal budget.
Will businesses benefit?
For most businesses, unfortunately, the answer is no.
The VAT change applies to domestic electricity bills, not standard commercial energy contracts. However, some organisations that qualify for domestic-rate VAT on energy such as certain charities, residential care homes and small businesses eligible for domestic energy VAT relief, may benefit.
What about hospitality businesses?
Hospitality businesses have had another announcement to celebrate.
The government has confirmed a 20% cut in business rates for pubs, clubs and live music venues from next April. The average pub is expected to save around £1,100 a year.
However, if you run a café, restaurant or hotel, you might be wondering where you fit in.
At the moment, these businesses aren’t included in the new relief, and industry groups are already calling for wider support across the hospitality sector.
The biggest changes are still to come
Although there have been a few headline announcements, most of the important decisions for businesses are expected to come in the Autumn Budget.
That’s when we’ll be looking out for potential changes to:
- Business taxes
- Business rates
- Employer costs
- Investment incentives
- Support for small businesses
Until then, there’s no need to make any big decisions based on speculation.
Our advice
When there’s a change in government, there’s always plenty of news and even more rumours.
Our advice?
Don’t panic, don’t make rushed decisions, and don’t believe everything you read on social media.
We’ll be keeping a close eye on the Autumn Budget and breaking down any changes into plain English, so you know exactly what they mean for your business.
If you ever have a question about how new tax rules could affect you, we’re always happy to help. After all, that’s what we’re here for!
2 Sisters Accounting Ltd
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I moved over to 2 Sisters Accounting about 3 years ago after getting fed up with accountants that I had to constantly chase and didn't feel were on my side as a customer, I'm so glad I did. Jessie and Beth exude professionalism, but also understanding and kindness. They are communicative, responsive, and demonstrate business savvy, and even more importantly, empathy. Being a small business owner is always challenging, but having someone like 2 Sisters in your corner allows you to get on with doing the work, knowing that there is someone you can trust to give you could advice and have your best interests at heart when it comes to all things tax, VAT, and company accounts. Highly recommended.
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