The government made several announcements in the week following Andy Burnham’s appointment as Prime Minister on 20 July 2026, including: 

• a reduction in the rate of VAT, from 5% to 0%, on domestic electricity bills, from 1 October 2026 (government press release); and
• a 20% cut in business rates bills for pubs, social clubs and live music venues from April 2027 (government press release). 

VAT cut 

The reduction in the rate of VAT on domestic electricity bills is expected to last up to 31 March 2027, with any changes beyond that to be announced at the next Budget. The government says that it expects suppliers to pass the VAT reduction on to all customers, including those on fixed tariffs.  

The government press notice announcing the change explains that “small businesses who qualify for the domestic energy VAT relief and are not registered for VAT, as well as charities and residential care homes eligible for the reduced rate will also benefit”. 

The VAT cut applies in England, Wales and Scotland. Different arrangements apply in Northern Ireland (NI). However, the government has committed to increasing the funding available to the NI executive to “ensure households across the UK benefit”. 

Having acknowledged that the VAT cut will be welcome news for many households, who will see reduced electricity bills, Ed Saltmarsh, ICAEW Tax Technical Manager, pointed out that “the measure also highlights some of the challenges of using VAT reliefs to deliver targeted support”. This includes that “the reduction cannot apply in Northern Ireland, meaning separate arrangements are needed to provide equivalent assistance there”. 

Read more from Ed 

Reduction in business rates 

An estimated 32,000 pubs, social clubs and live music venues are expected to benefit from a 20% reduction in business rates bills from April 2027. This follows earlier announcements of support packages, including a 15% discount on rates bills in 2026/27 announced in January 2026.   

The government press release explains that this new discount will not be available to “the very largest live music venues”, and that further details of the measure will be set out at the Budget. As business rates is devolved, the changes apply to England only. It is not yet clear if similar changes will be announced for Scotland, Wales and Northern Ireland.  

To fund the cut in business rates, the government intends to: 

• conduct a review of “reliefs for businesses that do not make a positive contribution to local communities, such as vape shops”; and 
• “crack down on businesses that sell through online marketplaces but do not comply with their tax obligations”. The government is currently consulting on proposals to extend the current online marketplace VAT liability rules to sales on online marketplaces by UK based businesses, when their goods are situated in the UK at the point of sale. 

While welcoming the additional support for pubs, clubs and live music venues, Richard Jones, ICAEW Senior Tax Technical Manager, said: “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”. 

Read more from Richard 

Bigger picture 

In a press release published on 22 July 2026, and which drew on a member survey, ICAEW called on the new Prime Minister to “tackle Britain’s burgeoning tax burden”. Three in five (57%) of members surveyed by ICAEW said that addressing the tax burden on business should be the new Prime Minister’s number one priority. 

Read more from Alan 

ICAEW’s Tax Faculty is currently engaged in a major piece of work: How to build a better tax system. The faculty believes that the UK’s tax system “is creaking under the weight of decades of accumulated complexity” and has suggested areas for improvement.