The UK Budget: What businesses need to know

28 October 2026

The Chancellor has delivered the UK Budget for October 2026, setting out measures that will impact British businesses.

Some announcements will take effect relatively quickly, while others are planned for future years or remain subject to further detail. Here is a summary of some key highlights that businesses should be aware of.

0% VAT on electricity extended for eligible businesses

The temporary reduction in VAT on domestic electricity bills from 5% to 0% will be extended from the end of March 2027 until 1 July 2027.  There are three main groups of businesses who benefit:

Businesses using an average of less than 33kWh of electricity per day
Certain charities and non-profit organisations
Some residential and mixed-use premises

Businesses currently charged the standard VAT rate (the majority of our customers) will continue to pay 20% VAT. Eligible British Gas customers will have the reduced rate applied automatically. You can find more information in our guide to 0% VAT on business electricity.

Gas Shipper Obligation will not go ahead

The government will no longer introduce the planned Gas Shipper Obligation, which would have funded hydrogen production projects. This would have been an additional non-energy charge on business gas bills.

Instead, the government intends to fund future hydrogen projects from public spending through general taxation.

In addition, the government has announced it will freeze the main rate of the Climate Change Levy from April 2028, which will help to further reduce electricity costs for businesses. However, an increase is expected in April 2027 before this freeze comes into force in 2028.

Support for energy intensive manufacturers

The government had previously announced the introduction of the British Industrial Competitiveness Scheme (BICS). This intends to reduce electricity costs for 10,000 eligible manufacturers. The scheme is due to begin in April 2027.

In the Autumn 2026 UK budget, the government announced that an additional back-payment covering the 2026 – 2027 financial year will also be given. You can find more information in our guide to the British Industrial Competitiveness Scheme (BICS).

Already in place is the Energy Intensive Industry Levy. Read more information on EII and see if your business qualifies.

New framework to be introduced to control energy policy costs

The government has committed that it won’t add any further new policy costs into energy bills until a new Cost Control Framework is put in place – unless those policy costs would reduce energy bills or are considered essential to maintain energy security.

This new Cost Control Framework will be put in place as part of the 2027 spending review. It will set budgets for each component of non-energy costs, ensuring bills reduce over the following decade. You can find information about what currently makes up business energy bills in our guide to non-energy costs.

What did the UK budget do for household energy?

The UK budget also included measures aimed at domestic energy customers. These included:

A £100 household energy payment

This will be given to 20 million households in England in council tax bands A to D. The Scottish, Welsh and Northern Ireland governments will receive a share of this funding to allocate too.

Removal of gas standing charges

Domestic energy customers will pay towards the maintenance and management of the gas network through their unit rate instead. It’s expected to save around 60% of households an average of £45 a year on their annual energy bill.

Further reform of electricity standing charges expected

The government committed to reviewing how electricity standing charges for domestic energy customers could be reformed, building on the changes confirmed for gas.

Other non-energy announcements affecting businesses

Alongside these announcements impacting business energy, the UK Budget also included a range of tax, employment and business-support announcements, such as:

Additional business rate support

Business rates will be removed for 70,000 businesses, by increasing the threshold for those that have to pay it from premises with a rateable value of £12,000 to £18,000 from April 2027.

Increase in National Minimum Wage and National Living Wage

Both will increase by 3.9% in April 2027, benefiting around 2.3 million workers.

Small Producers Relief

2,000 small alcohol producers will benefit from a £10 million per year support fund.

Tariff suspensions extended and expanded

The government is extending tariff suspensions on hundreds of products used across the food and drink, chemicals, plastics, hydrogen and automotive sectors.

Tax-free mileage

The government is permanently increasing tax-free mileage rates for employees and self-employed people who use their own car or van for work. The tax-free, per mile rate will be 55p for the first 10,000 miles and 35p per mile for mileage above 10,000 miles.

Young Entrepreneurs Allowance

A new pilot which intends to help cover one year of living costs for eligible young founders while they develop new businesses.

Capital Gains Tax (CGT) Founders’ Relief

This will give qualifying founders and investors a 10% CGT rate on up to £10 million of eligible gains from high-growth, innovative British companies.

New Data Centre Covenant

This establishes a new test that data centres are expected to meet, including the contribution they make to communities and the UK’s economic interests, matched by government support on energy connectivity for the projects that contribute the most to the UK’s objectives.

What happens next?

While the Autumn 2026 UK budget has now been announced, several measures will require legislation, consultation or more detailed implementation guidance before they come into effect.

We’ll continue to monitor energy-related announcements and will explain any developments that affect business energy customers in our monthly Business Energy Market Update.

See our Business Energy Market Update

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