Price Cap Rises 4% From 1 October, but Electricity VAT Falls to Zero
Ofgem's new energy price cap and a temporary zero rate of VAT on household electricity both took effect in Great Britain on 1 October 2026. For home battery owners, the electricity side of the change matters most.
What changed on 1 October
Ofgem announced the new cap on 26 August. From 1 October to 31 December 2026 it rises by 4%, taking the typical dual fuel household on direct debit from £1,663 to £1,723 a year, about £5 a month more.
Ofgem says higher wholesale gas prices are the main driver. Gas bills rise by about 8%, while a household without gas should see a rise of under 1%. Ofgem also lowered the typical consumption figure used for the benchmark, so the headline numbers are not directly comparable with earlier quarters.
Electricity VAT at 0%
HMRC's guidance says qualifying domestic electricity in Great Britain is zero-rated from 1 October 2026 to 31 March 2027. Gas is unchanged and Northern Ireland stays at 5%. Ofgem says the cap would have been about £45 higher without the VAT change.
Because the new unit rates already reflect the VAT cut, a lower electricity price is built into the figures you will see on a new bill. Fixed-tariff customers also benefit, according to Ofgem, as suppliers apply the change automatically.
Check your tariff
The cap limits unit rates for standard variable tariffs. Dynamic and fixed tariffs are priced separately, so compare them against the cap rather than assuming they follow it.
What it means for a home battery
A cheaper electricity unit can slightly reduce how much a battery saves for each kilowatt-hour it shifts, because the gap between expensive and cheap periods is part of the saving. We would not expect a dramatic change, and the zero rate is scheduled to end on 31 March 2027, so we would not rebuild a purchase decision around it.
If you are weighing a battery, run your own numbers in the home battery calculator and read our explanation of how a home battery saves money. We could not find an official statement on how the VAT change affects the value of battery storage, so treat any specific claim you see elsewhere with caution.
What we could not confirm
The VAT change applies to electricity supply, and the sources we read do not say anything about VAT on batteries or solar panels. Check the current rules with your installer before you sign anything.
Sources
- Ofgem: Energy price cap will rise by 4% from October 2026
- GOV.UK: Temporary zero rate of VAT for domestic electricity in Great Britain (Revenue and Customs Brief 10 (2026))
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