UK Business Calls For Scrapping Taxes on Electricity Bills

Large UK businesses have urged the government to remove taxes on commercial electricity bills to lower costs and improve competitiveness as energy prices climb. The call follows a government decision to scrap the 5% VAT on household electricity and ahead of an Ofgem price-cap rise expected to push household bills to a three-year high this winter.

By AI NewsroomPublished about 4 hours agoUpdated about 4 hours ago0 views

Why It Matters

Rising energy costs are affecting both households and industry, and businesses argue extending tax relief to firms could reduce operating costs and support investment in electrification. The issue intersects fiscal choices already made by the government, including funding the household VAT cut by cancelling a Digital ID program.

Key Facts

Business demand: Large UK businesses have called on the government to remove taxes on business electricity bills.
Household VAT cut: The government announced a removal of the 5% VAT on household electricity bills.
Effective date: VAT removal on domestic electricity to take effect from October 1.
Funding: Cost of the VAT removal financed by cancelling a $2.4 billion (£1.8 billion) Digital ID program.
Price-cap change: Ofgem raised the energy price cap on household costs by 4% for October through December.

A coalition of large UK firms has urged ministers to remove taxes on business electricity bills, arguing that doing so would make British industry more competitive and ease the pressure of soaring energy costs. The plea comes as both consumers and businesses face higher energy bills after a renewed surge in oil, gas and electricity prices following the Iran war. Earlier this summer the government announced it would abolish the 5% value-added tax on household electricity. Officials said the cut — due to take effect on October 1 — will be funded by cancelling a $2.4 billion (£1.8 billion) Digital ID programme, and suppliers are expected to pass the reduction on to all customers, including those on fixed tariffs. Regulator Ofgem has already raised the energy price cap by 4% for the October-to-December period, a move that market watchers say will push household bills to a three-year high at the start of winter as higher gas prices feed through to retail costs. The VAT removal is intended to blunt some of that pressure for households. In a letter to Chancellor John Healey shared with Bloomberg News, industry groups argued that shifting electricity levies from business and household bills onto government spending would immediately lower energy costs and improve competitiveness. They also said such a move would address distortions that currently discourage investment in electrification, and have called for the same tax relief to be extended to businesses to help protect UK industry.