Energy Taxes

Value Added Tax ( VAT ) is added to energy bills at either  5% or 20 % depending on the type of supply.The vast majority of businesses will pay 20 %, but residential users,charities and low users qualify for the reduction to 5%.

A low user is defined as one who uses less than 1000 Kwh of Electricity or 4397 Kwh of gas per month. It does not matter that the supply is for business use.

Climate Change Levy is another government tax which is intended to reduce  energy consumption in the commercial sector. The rates for 2022/2023 are 0.00568 £/Kwh for gas and 0.00775£/Kwh for electricity. These are applied for each Kwh of energy used. VAT is then added to the CCL charges.

A business which qualifies for VAT reduction to 5%, automatically qualifies for CCL exemption, and the charges should not be applied.

Feed in Tariff charges ( FIT charges ) are used by suppliers to pay enhanced rates to small energy producers such as those who have solar panels and feed back into the grid. Naturally, the money must come from somewhere so energy companies must increase the charges paid by consumers. Mostly,  FIT charges are included in the rates quoted by energy suppliers, but some are not. It is therefore prudent when comparing prices to ask if FIT charges are included in the quoted price.