The 2026 Budget made a lot of changes across many taxes and VAT was no exception. Some changes are administrative such as bringing the regulations concerning VAT126 claims into line with other claims made by local authorities and similar (not covered below) but others such as the extension of the temporary zero rate on domestic supplies of electricity will affect millions of people.
2026 Budget VAT changes
- Temporary zero rate on supplies of domestic electricity
The temporary zero rate was due to end on 31 March 2027 but has been extended until 30 June 2027.
Note that the temporary zero rate does not apply in Northern Ireland where domestic supplies are liable to VAT at 5%.
- End of the temporary zero rate on energy saving materials
The Government has confirmed that the temporary zero rate will expire on 31 March 2027 and will revert to 5% on 1 April 2027. Heat batteries will be added to the list of energy saving materials with effect from 1 April 2027.
- VAT on electricity supplied at public EV charging points
From 1 November 2026 any supply of electricity from publicly available EV charging points will be a non-domestic supply of electricity and liable to VAT at 20%. Publicly available EV charging points include all charging points available to the public, a section of the public, and to employees and contractors at their workplace.
If an EV charging point is available only to residents of a particular residential building the supply is still a domestic supply of electricity for VAT purposes.
- Extending the VAT liability of online marketplaces
From October 2027 the Government intends to extend the liability of online marketplaces to account for VAT on sales of small consignments (valued at £135 or less) by UK-based businesses. The VAT will be accounted for whether the UK-based businesses are VAT registered or not. VAT will be accounted for by the platform on sales by non-registered UK businesses if their turnover on that particular platform exceeds a threshold defined by regulation (likely to be £90,000).
The new regulations will not apply to non-business sales (e.g. sales of personal items), sales of second-hand goods, and business to business (B2B) sales.
- Distance-selling rules amended (Northern Ireland only)
From 1 January 2027 the distance selling rules will be amended to restrict the 10,000 euro threshold to distance sales made only from the supplier’s home state.
- Removing the reverse charge on services from overseas suppliers to unregistered UK businesses
From 1 April 2027 a business based outside the UK must account for UK VAT on their services to unregistered UK businesses. Unregistered UK businesses will no longer need to monitor reverse charge services received from overseas suppliers in order to determine whether they need to register for VAT.
- Land sold to registered housing associations
From 1 April 2027 bare land sold to a registered housing association will be zero rated.
It is expected that some sort of certification will remain to confirm the status of the housing association.
- Supply of a deputy medical practitioner
From 1 May 2027 the supply of a deputy medical practitioner, by, for example, a medical staff agency, will no longer be exempt from VAT.
- Zero rate on donated medicines
A new zero rate will be introduced with effect from 23 June 2026 on medicines donated by pharmaceutical companies for NHS clinical trials.
Future developments
- Operators of taxis and private hire vehicles
From January 2028 some private hire vehicle operators outside London who act as agents for the drivers will be required to account for VAT on the full value of the fares rather than just on the commission charged to the drivers. Currently private hire vehicle operators in London are required to act as principal when supplying transport services to passengers. This measure will, in effect, put large operators outside London on the same basis.
The final design of the measure including the threshold to determine whether a private hire vehicle operator is “large” will be decided after further consultation. The suggested threshold is £50 million in annual fare turnover.
- Repeal of call-off stock simplification (Northern Ireland only)
The EU-wide simplification that means that traders do not have to register in other member states where they hold call-off stocks will be withdrawn in 2028.
- Paying VAT and PAYE liabilities by direct debit
From April 2029 businesses must set up direct debits for the payment of VAT and PAYE liabilities.
- Electronic invoicing
The Budget has set out the timetable and necessary legislative steps to introduce electronic invoices for all VAT invoices issued to VAT registered businesses from April 2029.
- Tour Operators Margin Scheme (TOMS) consultation
The Government is asking for views on how TOMS currently works and suggestions for changes, improvements and simplifications.