"Reducing the cost of household electricity bills will be welcome news for many consumers. Unlike some VAT reductions, households are likely to see the benefit reflected directly in their electricity bills because domestic energy prices are subject to the energy price cap, which is calculated on a VAT-inclusive basis.

"However, the measure also highlights some of the challenges of using VAT reliefs to deliver targeted support. The reduction cannot apply in Northern Ireland, meaning separate arrangements are needed to provide equivalent assistance there.

"The relief may also extend beyond households. Any premises using less than 1,000 kWh of electricity per month is generally treated as domestic for VAT purposes, meaning some small businesses could also benefit, but not all. However, small businesses that are VAT-registered are less likely to see a financial benefit because they can usually recover VAT incurred on their energy costs.

"Over time, the VAT system has accumulated a range of different rates, reliefs and exceptions, which has contributed to additional complexity of the tax system, which in turn hinders business growth. The government should continue to focus on simplifying the tax system and tackling existing complexities in order to support long-term economic growth.”

On the business rates cut announced on Thursday 23 July 2026 for pubs, clubs and music venues, Richard Jones, ICAEW Senior Tax Technical Manager said:

“We’re pleased that the government wishes to provide extra support for pubs, clubs and live music venues. But it’s important to acknowledge other vital parts of our high streets, such as cafes and restaurants, are also struggling with the cost of doing business, especially due to the increase in employer’s NIC.

“The input we’ve received from our members highlights that businesses in all sectors and parts of the country have been struggling with the cost and complexity of meeting their tax obligations. To help reduce this burden on businesses, we encourage the government to be more ambitious in reforming business rates to incentivise growth, improve fairness and not penalising investment - which the current system does. For example, moving to a more agile system could prevent the three-yearly shock that businesses of all sectors face when revaluations take place.”

ENDS