VAT & climate change levy rates

The standard rate of VAT set by HMRC for business electricity and gas supplies is 20%. Your bills will include 20% VAT as standard, unless you qualify for the reduced rate of 5%.

You may qualify for the reduced VAT rate if your energy supply falls under any of the following categories:

  • Domestic use only
    e.g. Domestic homes, residential and care homes, job-related accommodation, student halls of residence.

  • Charitable non-business use
    e.g. Places of worship and community spaces funded by grants and donations.

  • Uses a small amount of energy within de minimis limits
    We’ve included more information about what de minimis means and how it’s applied below.

  • Where 60% or more of power used at the supply address is for domestic or charitable non-business use.

For more detailed information about the above uses that qualify for reduced VAT, please go to the HMRC website.

What does de minimis mean?

When we’re talking about energy, ‘de minimis’ describes a daily usage threshold. If the amount of energy your business uses falls under this threshold, you’ll be charged the reduced rate of 5% VAT.

The de minimis thresholds are:

  • Electricity: a supply of not more than an average of 33kWh per day, whether billed to an estimated or actual reading.
  • Gas: a supply of not more than an average of 145kWh per day, whether billed to an estimated or actual reading.

Depending on the size of your business and the average amount of energy you use, you may move between being under and over the de minimis threshold over the course of the year. If this happens, there’s nothing you need to do. We’ll monitor your usage and if needed, rebill you to make sure that we’re applying the correct VAT rates.

You can read more about de minimis on the HMRC website.

Apply for the reduced VAT rate

If your business qualifies for the reduced VAT rate of 5%, please complete and submit the VAT Declaration form, available to download below.

You only have to complete the VAT Declaration form if your business qualifies for the reduced rate for any reason other than its average energy consumption. i.e. You don’t have to make a VAT Declaration if your consumption is within de minimis limits.

Please make sure you submit this form to us as close to your Supply Start Date as possible, so that we can make sure you’re on the right VAT rate from the start.

Climate Change Levy rates

The Climate Change Levy (CCL) is an environmental tax intended to encourage businesses to reduce how much energy they use and become more sustainable. The CCL is a per kWh charge that will be added to your bill if your average consumption is over the de minimis threshold.

CCL rates are fixed for all energy companies and adjusted at the start of each financial year. The table below sets out the rates for the next few years.

Exemption from the Climate Change Levy

You may not have to pay the CCL if you qualify for the reduced VAT rate of 5%. 

There are other exemptions in place for different types of fuels and uses, such as fuel used to generate electricity and in some types of transport.

If you think your business may be exempt, go to the HMRC website to find out more and fill out the exemption form.

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