UK and Philippines Cut Energy VAT to Lower Bills

The United Kingdom and the Philippines have announced separate measures to reduce value-added tax (VAT) on electricity bills to alleviate cost-of-living pressures.

In the United Kingdom, Prime Minister Andy Burnham announced that VAT on domestic electricity bills will drop from 5% to 0% starting October 1, 2026. The measure is expected to save the average household approximately £45 per year and reduce inflation by roughly 0.10 percentage points. The government will fund the £850 million cost by reprioritizing departmental budgets and canceling a digital ID program.

Simultaneously, the Energy Regulatory Commission and the Bureau of Internal Revenue in the Philippines have removed the 12% VAT on allowable system loss charges, effective October 2026. While the underlying system loss charge remains, the Energy Regulatory Commission mandated a new billing format to help consumers distinguish between VAT-exempt charges and those subject to tax. The commission also capped late payment fees at 2% and standardized other service charges to prevent double charging.

Challenges remain in the Philippines, where the National Electrification Administration warned that phasing out recoverable non-technical losses, such as electricity theft, would require P7.5 billion in infrastructure upgrades to avoid harming electric cooperatives.