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Mitsubishi Electric Welcomes UK Electricity VAT Cut as It Takes Effect

Mitsubishi Electric Residential UK says the temporary VAT cut could encourage heat-pump adoption. Here is what changes on qualifying electricity bills, who benefits and what remains uncertain.
Entry790 Date Time3 min MechanicCarCody Team
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Mitsubishi Electric Residential UK has welcomed the electricity VAT cut that took effect on 1 October 2026, saying lower electricity costs could encourage households to switch from gas boilers to heat pumps. For qualifying electricity supplies in Great Britain, VAT is temporarily 0% through 31 March 2027; the change is automatic for eligible bills, but it does not prove that heat pumps are cheaper overall or that more households have adopted them.

What Mitsubishi Electric said about the VAT cut

In a LinkedIn post, Mitsubishi Electric Residential UK attributed this statement to James Chaplen, its Head of Product Marketing and Communications: “The cut to VAT on electricity bills from October is a welcome step towards encouraging households to make the switch to heat pumps and to move away from gas boilers.” The post also attributes to Chaplen the comment, “This reduction in the cost of electricity will be welcomed by many households.”

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The company’s argument is that reducing electricity costs could narrow the gap between electricity and gas prices per kilowatt-hour, making electric heating more appealing. That is a prediction about a possible incentive effect, not evidence that the policy has already increased heat-pump adoption.

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How the electricity VAT cut works

HMRC says qualifying electricity supplies in Great Britain are temporarily liable to VAT at 0% from 1 October 2026 through 31 March 2027. In Northern Ireland, qualifying domestic electricity remains at 5%. The relief applies to supplies that already qualified for the reduced rate; the qualifying-supply rules have not otherwise changed. HMRC’s notice on VAT for fuel and power sets out the rules.

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This is a change to the VAT rate on qualifying supplies, not the removal of VAT from every transaction connected with electricity. For example, HMRC says electricity supplied for public electric-vehicle charging is standard-rated regardless of the quantity supplied. HMRC’s EV-charging guidance explains that distinction.

Does the cut apply to household bills and fixed tariffs?

Yes, where the household’s electricity supply qualifies. The government says households do not need to apply: suppliers are expected to stop charging VAT on qualifying household electricity from 1 October, including electricity on fixed tariffs and prepayment-meter top-ups. The policy also covers certain small businesses, charities and residential care homes that already qualified for reduced-rate VAT treatment. The government’s announcement outlines the practical change.

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  • An inverter-driven compressor generates the precise capacity needed to maintain a temperature set point
  • Dehumidifying mode & Jet Cool Automatic restart following a power outage
  • SEER 18, 220V, 20 AMP Breaker, AUTO restart

For a billing period that crosses 1 October, a supplier may determine VAT liability by when the electricity was consumed. ICAEW’s summary of HMRC Revenue & Customs Brief 10 (2026) says HMRC recommends meter readings around the changeover, while accepting other fair and reasonable methods where readings are unavailable. Read ICAEW’s summary of the billing guidance.

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There can also be a different treatment for some park-home residents. Parliament notes that where electricity is not individually metered and billed according to actual consumption, it may be treated as part of the pitch fee and take that charge’s VAT treatment. The parliamentary answer describes this qualification.

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  • An anti-corrosion treatment applied to the aluminum fins of the heat exchanger of the outdoor unit to protect against corrosion caused by salt, sulfur, and other airborne contaminants, especially in coastal and industrial areas.
  • An inverter-driven compressor generates the precise capacity needed to maintain a temperature set point
  • Dehumidifying mode & Jet Cool Automatic restart following a power outage
  • SEER 18, 220V, 15 AMP Breaker, AUTO restart

How much could a household save?

The Department for Energy Security and Net Zero estimates an average saving of about £45 per household per year. HM Treasury says the measure makes the annual Ofgem price cap about £45 lower. These are estimates, not guaranteed savings for each household: the amount on an individual bill depends on the tariff and electricity consumed. The government announcement also says around 6 million households eligible for the Warm Home Discount will receive a separate £150 discount; that support is not part of the VAT cut. The government’s announcement gives the household-saving and Warm Home Discount details, and HM Treasury’s announcement gives the price-cap estimate.

Parliament has said around 29 million UK households are expected to benefit from the measure. That figure is an estimate of the number of households affected, not a promise of the same saving for every home. The parliamentary answer provides the estimate.

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Does the VAT cut make heat pumps cheaper to run?

It reduces the VAT charged on qualifying electricity supplies in Great Britain during the temporary period, which can lower the electricity cost faced by an eligible household. But the VAT change alone does not establish that a heat pump will cost less to run than a gas boiler in a particular home. That comparison also depends on electricity and gas unit prices, the heating system’s efficiency, the property’s suitability and installation costs.

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Mitsubishi Electric’s post presents the tax change as a step that could encourage switching, but the cited government and parliamentary material does not measure a resulting change in heat-pump adoption. The policy’s effect on uptake therefore remains unestablished in these sources.

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  • Dehumidifying mode & Jet Cool Automatic restart following a power outage
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Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.

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