Electricity VAT cut: what it means for Agile Octopus
The electricity VAT cut means Agile Octopus prices in Great Britain no longer carry VAT. Since 1 October 2026, every half-hourly Agile price is about 4.8% lower than it would have been with the old 5% rate. The zero rate runs until 31 March 2027.
What has changed
The government announced a temporary zero rate of VAT on household electricity on 21 July 2026. HMRC confirmed the details in a brief published on 8 September 2026.
- When: 1 October 2026 to 31 March 2027.
- Where: England, Scotland and Wales. Northern Ireland stays at 5%.
- What: electricity only. Gas and other fuels keep 5% VAT.
- Before: household electricity had 5% VAT, the reduced rate for domestic fuel.
The Ofgem price cap changed on the same day. For 1 October to 31 December 2026, the cap is £1,723 a year, up 4% on the last period. It's based on average rates for people paying by Direct Debit. The average electricity unit rate is 26.32p/kWh, with a 54.83p daily standing charge.
Those figures include no VAT on electricity. From July to September they were 26.11p/kWh and 57.19p a day, including 5% VAT. Ofgem notes that the two periods can't be compared directly because of the VAT change.
What it means for Agile
Agile Octopus prices follow the wholesale market (where suppliers buy power) and change every half hour. The Octopus API gives each price with and without VAT. Until 30 September, the price with VAT was 5% above the price without. From 1 October, the two figures are the same.
The cut therefore applies to every half-hour, peak or off-peak. A price that would have been 42.00p/kWh with VAT is now 40.00p/kWh. Wattly's live Octopus Agile prices come straight from the API, so they already show the VAT-free figures.
Two things haven't changed. Octopus says Agile prices never go above 100p/kWh, its "Price Cap Protect" ceiling. Prices for the next day still arrive between 4pm and 8pm, usually nearer 4pm.
Worked example: 1 October 2026
The table shows real Agile import prices on 1 October 2026. The last column is what each price would have been with the old 5% VAT.
| Region | Half-hour | Price paid | With 5% VAT |
|---|---|---|---|
| London (C) | 4:30am to 5am | 22.84p/kWh | 23.98p/kWh |
| London (C) | 6:30pm to 7pm | 50.06p/kWh | 52.56p/kWh |
| Merseyside and North Wales (D) | 4:30am to 5am | 25.46p/kWh | 26.73p/kWh |
| Merseyside and North Wales (D) | 6:30pm to 7pm | 55.20p/kWh | 57.96p/kWh |
The saving is larger in pence when prices are high, but always the same share. At the 6:30pm peak in London, it was 2.50p/kWh. Every 10kWh used at that price cost 25p less than it would have with VAT.
The cut is small next to the daily swing. In London on 1 October, the dearest half-hour cost more than twice the cheapest. Moving use out of the 4pm to 7pm peak still matters most. Wattly's cheapest time to use electricity finder shows the cheapest block of time for a task of any length.
How it compares with the price cap rate
The price cap's 26.32p/kWh is an average across Great Britain, so it is only a rough benchmark. On 1 October, 23 of London's 48 half-hours were below it. In Merseyside and North Wales, only 3 were. Agile prices differ by region. You can compare Agile prices across all 14 regions.
Whether Agile works out cheaper depends on when you use power, not on the daily average. Your smart meter's half-hourly readings show your own pattern.
Comparing prices before and after 1 October
Charts that run across 1 October show a step of about 5% that has nothing to do with the wholesale market. To compare like with like, divide a September price by 1.05. On 30 September, London's 6:30pm price was 47.25p/kWh with VAT, or 45.00p/kWh without.
Keep this in mind when you look at Agile price history by month. The zero rate is due to end on 31 March 2027. If VAT then returns, the step will go the other way.
FAQ
Is there VAT on electricity from October 2026? No, not for households in England, Scotland and Wales. The zero rate runs from 1 October 2026 to 31 March 2027.
Does the VAT cut apply to Agile Octopus? Yes. Agile prices from the Octopus API have carried no VAT since 1 October 2026, which makes them about 4.8% lower.
Has VAT on gas changed? No. Gas keeps 5% VAT, and the Ofgem price cap figures for gas still include it.
Does the VAT cut apply in Northern Ireland? No. Household electricity in Northern Ireland stays at the 5% reduced rate.
What happens to my bill if it covers dates either side of 1 October? HMRC lets suppliers split the bill by when the energy was used. It recommends using meter readings to do this.