A reduction in VAT from 5% to 0% will be applied to domestic electricity bills on the Isle of Man from 1 October until the end of March 2027, the government has confirmed. The move mirrors the measure outlined in the UK, which is expected to be in place until the end of the 2026-27 financial year.
Manx Utilities said that while the amount saved will vary depending on electricity usage during the period, removing VAT would save a typical household about £50 per year. The Treasury said the overall reduction in VAT revenue collected as a result of the change would be between £1 million and £1.4 million, depending on consumption during the winter.
The reduction was announced in the UK on Tuesday as part of measures to ease cost-of-living pressures on households. The Manx government said the change would be made in line the island's reciprocal arrangements under the Customs and Excise Agreement, which sees the island maintain the same VAT rates as the United Kingdom.
Who will benefit from the change?
Domestic customers will benefit from the VAT cut, along with small businesses that already qualify for domestic energy VAT relief and are not VAT registered. That relief applies where electricity consumption is below an average of 1,000 kWh per month.
Eligible charities and residential care homes will also qualify for the reduction.
The measure applies only to electricity bills, with the change taking effect from 1 October and continuing until the end of March 2027.
How does the Isle of Man set VAT rates?
The Manx government said the change would be made in line with the island's reciprocal arrangements under the Customs and Excise Agreement. Those arrangements mean the island maintains the same VAT rates as the United Kingdom.
The UK reduction was announced on Tuesday as part of wider measures aimed at easing household cost-of-living pressures.
What did Manx Utilities and the Treasury say?
Manx Utilities said the saving would depend on how much electricity a household uses during the period covered by the reduction. On average, it estimated the removal of VAT would save a typical household about £50 a year.
The Treasury said the reduction in VAT revenue collected would be between £1 million and £1.4 million, with the final figure depending on winter consumption levels.
The government said the policy would follow the island's reciprocal VAT arrangements with the UK and would run alongside the UK measure expected to remain in place until the end of the 2026-27 financial year.
Key Facts
- VAT on domestic electricity bills in the Isle of Man will fall from 5% to 0% from 1 October.
- The cut will remain in place until the end of March 2027.
- Manx Utilities says a typical household could save about £50 a year.
- The Treasury estimates a VAT revenue loss of between £1 million and £1.4 million.
- Small businesses, eligible charities and residential care homes may also benefit.
