VAT on domestic electricity falls from 5% to 0% from 1 October 2026 until 31 March 2027, worth roughly £45 a year to a typical household. This is a UK-wide measure announced by the government on 21 July 2026, not a Greater Manchester power — VAT is set nationally and is not devolved to mayors or combined authorities.
As reported by The Herald, the move applies to all households in the region on standard variable tariffs. The saving is modest, roughly 2% of the current price cap, but the principle is significant: a regional government using tax powers to directly lower household energy costs.
Who qualifies, and who doesn’t
Only households in the ten boroughs of Greater Manchester qualify. That is about 1.2 million homes. Everyone else in England and Wales pays the full 5% VAT on electricity and gas, which is already the lowest VAT rate allowed under UK law. This is a UK-wide measure announced by the government on 21 July 2026, not a Greater Manchester power — VAT is set nationally and is not devolved to mayors or combined authorities. No other metro mayor has the same authority.
Glazing is standard-rated for VAT at 20%. The zero rate for energy-saving materials covers insulation, heat pumps and solar panels; HMRC names secondary and double glazing as excluded (VAT Notice 708/6). For a larger home using 15,000 kWh of gas and 4,500 kWh of electricity, the saving rises to roughly £85. It is not a game-changer for fuel poverty, but it is real cash in pocket every month.
The regional fairness problem
Yet the policy exposes a growing fracture in UK energy policy. Households in Liverpool, Leeds, or Birmingham, with identical bills, get no such relief. The Energy Saving Trust has long argued that national VAT on energy is regressive, hitting lower-income households hardest. Burnham’s move proves it can be removed. The question is why it cannot be removed everywhere.
The Treasury has resisted a national cut, citing lost revenue of roughly £1.5 billion a year. But regional pilots like this one put pressure on that position. If Greater Manchester can do it without fiscal collapse, ministers will struggle to argue it is impossible elsewhere.
What it means for homeowners outside the North West
For the 95% of UK households outside Greater Manchester, this news shows national policy moves slowly. The price cap will rise again in October by an estimated £63, according to Cornwall Insight, wiping out any benefit from the VAT cut for those who do not get it.
The practical response is the same as it has been for three years: reduce consumption. Loft insulation costs about £300 and saves £200 a year. Cavity wall insulation, typically £700–£1,200, saves £250 a year. Air source heat pumps, under the Boiler Upgrade Scheme, cost roughly £2,500 after grant and save £150–£300 a year versus a gas boiler. These are not regional fixes. They work in any UK home.
Burnham’s VAT move is welcome for those it covers. For everyone else, the lesson is that energy policy is still a national mess, and your best hedge is your own roof.
Frequently Asked Questions
No. The VAT scrapping applies only to households in the ten boroughs of Greater Manchester. This is a UK-wide measure announced by the government on 21 July 2026, not a Greater Manchester power — VAT is set nationally and is not devolved to mayors or combined authorities. VAT on domestic electricity falls from 5% to 0% from 1 October 2026 until 31 March 2027, worth roughly £45 a year to a typical household.
For larger homes with higher consumption, the saving could be up to £85 a year. The saving appears as a reduction on each monthly or quarterly bill.
