Value added tax (VAT)
It’s important to realise that most businesses pay VAT at a rate of 20 per cent on their gas and electricity bills. In comparison, households pay a much lower rate of five per cent on their energy.
Climate change levy
Unlike domestic bill payers, businesses are also charged what’s known as a climate change levy (CCL). This environmental tax is paid on both electricity and gas. The rates currently stand at 0.00811p per kilowatt hour (KWh) on electricity and 0.00406p per KWh on gas. These rates are set to change in April 2021. See table below for details.
| Energy type |
Rate from April 2020 |
Rate from April 2021 |
| Electricity (£ per kilowatt hour (KWh)) |
0.00811 |
0.00775 |
| Natural gas (£ per KWh) |
0.00406 |
0.00465 |
Unit price
The per unit price tends to be lower for businesses than domestic customers. This is because businesses usually use far greater volumes than households. Of course, the unit price will vary depending on the contract you’re on.
Standing charges
Standing charges refer to the fixed daily amounts you have to pay on your energy bills, regardless of how much or how little energy you use. The charge is designed to cover the cost of your energy company performing meter readings, keeping your property connected to the energy network and carrying out maintenance and repairs.
Utility suppliers charge domestic users between 5p and 60p per day for electricity and 10p and 80p per day for gas. Business users, meanwhile, can expect to be charged 15p to £1.50 per day for electricity and between 19p and £6 per day for gas.
Breaking down your business energy bills
When reviewing your business energy bills, it can be difficult to know what you’re looking at if you’re not familiar with all the different types of charges and rates. This can make comparing bills, contracts and deals difficult. To help you understand your gas and electricity and potentially save money, we’ve provided a breakdown of what the different elements of your energy bills mean.
Your business gas bill
Your business gas bill should include the following information:
Your account number – this is the code used to identify your business when dealing with your gas supplier.Bill date – the date the invoice was generated.
Bill date period – the date range the bill relates to.
Your meter point reference number (MPRN) – this unique 10-digit number is given to your electricity connection and meter. When switching suppliers, you might be asked to provide this number.
Your meter serial number – this is a combination of letters and numbers used to identify your meter. It should be the same as the number near the barcode on your meter.
Estimated readings – if you haven’t provided your supplier with meter readings, they will estimate how much gas you’re using.
Your meter readings – if you have provided meter readings, this will be shown on your bill and terms ‘actual’ or ‘customer supplied’ will be used.
Tariff – this shows the price you are charged per unit of gas (KWh).
Standing charge – this is a fixed daily levy charged by your energy provider for maintaining your gas supply. It is not affected by how much gas you use.
Payment date – the date by which payment is due.
VAT – this tax will be charged at a rate of 20 per cent for most businesses, however some businesses, such as charities, are charged tax at the reduced rate of five per cent.
CCL – this green tax that is charged on business’ energy usage and is designed to encourage them to become more energy efficient.
What impacts the cost of business gas bills
Commercial energy bills are affected by a number of factors, including:
Fixed or variable – if you have a fixed tariff, the price you pay per KWh will not change for the duration of your contract. If you have a variable tariff, however, your rate could go up and down depending on market rates.
Seasonality – depending on your business, you may find you use more gas in autumn and winter.
Business size – bigger businesses tend to use more energy and therefore incur higher energy costs. Small businesses also tend to pay lower standing charges than medium sized and large businesses.
Minimal use – if your business uses an average of less than 145 kWh of gas per day (4,397 kWh per month), does not have to pay CCL and it is also charged VAT at a reduced rate of five per cent.
Charitable status – if your business is a charity, it is entitled to pay VAT at a rate of five per cent.
Dual use properties – if 60 per cent of the gas you use is for domestic purposes, your business should be charged VAT at a rate of five per cent. If it is less than this, you can still pay VAT at five per cent on the proportion of gas you use for domestic purposes and 20 per cent on the amount you use for commercial purposes.
Your Business Electricity Bill
Your business electricity bill should include the following information:
Your account number – this is the code used to identify your business when dealing with your electricity supplierBill date – the date the invoice was generated
Bill date period – the date range the bill relates to
Your meter point administration number (MPAN) – this is a 21-digit number used in the UK to identify your property
Your meter serial number – this is a combination of letters and numbers used to identify your meter. It should be the same as the number near the barcode on your meter.
Estimated readings – if you haven’t provided your supplier with meter readings, they will estimate how much electricity you’re using
Tariff – this shows the price you are charged per unit of electricity (KWh)
Your meter readings – if you have provided meter readings, this will be shown on your bill and terms ‘actual’ or ‘customer supplied’ will be used
Standing charge – this is a fixed daily levy charged by your energy provider for maintaining your gas supply. It is not affected by how much gas you use.
Payment date – the date by which payment is due
VAT – this tax will be charged at a rate of 20 per cent for most businesses, however some businesses, such as charities, are charged tax at the reduced rate of five per cent.
CCL – this green tax that is charged on business’ energy usage and is designed to encourage them to become more energy efficient.
What impacts the cost of business electricity bills?
LIke business gas bills, business electricity bills can be influenced by a range of factors. These include:
Type of electricity contract – if you have a fixed tariff, the price you pay per unit of electricity will stay the same for the duration of your contract. If you have a variable tariff, however, your rate is liable to fluctuate with market rates.
Seasonality – many businesses will incur higher electricity costs during colder, darker months
Business size – large businesses tend to consume more electricity and therefore their bills tend to be higher. Standing charges also tend to be higher for bigger businesses.
Minimal use – if your business uses an average of less than 33 kWh of electricity per day or 1,000 kWh of electricity per month, it does not have to pay CCL and it is also charged VAT at a discounted rate of five per cent.
Charitable status – if your business holds charitable status, it is entitled to pay VAT at a rate of five per cent.
Dual use properties – if 60 per cent of the electricity you use is for domestic purposes, your business should be charged VAT at a rate of five per cent. If it is less than this, you can still pay VAT at five per cent on the amount of electricity you use for domestic purposes and 20 per cent on the proportion you use for commercial purposes.
Ready to save?
If you think you could be saving money on your gas or electricity bills, you can get a quote from Utility Bidder.
