VAT for business gas and electricity
Businesses are required to pay VAT on their gas and electricity costs. However, you may be eligible for a discount on your business energy prices. If your company meets the criteria, you could have the chance to reduce this VAT energy rate to just 5%.
What is VAT?
Does my business have to pay VAT on energy?
Yes. Suppliers will automatically include VAT on their business electricity and gas tariffs. Even though these tariffs are technically considered as a business-to-business purchase, you will not be able to claim the tax back on your annual return. Furthermore, even though business energy is an essential service, VAT will still be applied to your bills.
How much VAT do I need to pay for business energy?
VAT for energy will be charged at a rate of 20% for most UK businesses. This tax is automatically added to your commercial energy bill by your provider. However, depending on the type of business you operate and the way you make use of energy, you may be eligible for a 5% discounted rate. More on that below.
How do I get a discount rate for VAT on business energy?
How can I reduce my business energy VAT?
To cut down on the amount of VAT you pay for business energy, you will want to become more energy efficiency. Installing solar panels on your premises can help you generate your own electricity, and these are far more environmentally friendly. It is also highly recommended that you conduct a business energy audit, as this will help you identify how to improve your business’ overall power efficiency through your findings. Making the necessary changes doesn’t have to be expensive either, even simple things like switching to LED light bulbs and asking employees to turn off their computers at the end of the work day can make a noticeable impact.
We hope this guide has given you a clearer understanding on business energy VAT. If you have been overpaying, please do remember to reclaim any extra money paid to your supplier.