VAT on Electricity Ireland

VAT on electricity in Ireland is charged at a reduced rate to help households and businesses manage the cost of energy. Unlike most utilities in the standard tax system (with standard 23% and reduced 13.5% tiers, see the full VAT Rates Ireland guide), domestic gas and electricity have been deliberately moved to a lower VAT band as part of a series of government measures aimed at easing energy bills during a period of high and volatile prices. Because VAT is applied to the whole supply — standing charges, unit consumption, and levies alike — the rate that applies makes a real difference to what you pay each billing cycle. This page explains the current electricity VAT rate in Ireland, how it feeds into your bill, and the wider support schemes that sit alongside it.

Current VAT Rate on Electricity and Gas

The current VAT rate on electricity and gas in Ireland is 9%. This is a reduced rate, sitting below both the 23% standard rate and the 13.5% rate that ordinarily applies to domestic fuel.

The 9% electricity and gas VAT rate has a specific history. The government first cut VAT on domestic gas and electricity from 13.5% to 9% in 2022 as a temporary inflation-relief measure, at a time when energy prices were spiking to record levels. Rather than lapse, the reduced rate was extended repeatedly through successive budgets as high energy costs persisted. In Budget 2026, the 9% rate was extended all the way to 31 December 2030 — a much longer runway than the short rolling extensions of previous years, giving households and suppliers several years of certainty.

The significance of this extension is straightforward: had the rate been allowed to revert to 13.5%, energy bills would have jumped by an automatic 4.5 percentage points of VAT overnight. By locking in 9% through the end of the decade, the measure shields consumers from that increase even as one-off supports are wound down. It is estimated that the reduced rate saves a typical electricity customer roughly €90 a year, and a gas customer around €62, compared with the 13.5% rate.

After 31 December 2030, the rate is currently scheduled to revert to 13.5% unless a future budget extends it again through the normal budgetary process.

How to Calculate VAT on Electricity Bills

A common misconception is that VAT applies only to the energy you use. In fact, VAT at 9% is applied to almost the entire bill — the standing charge, your usage charges, and the PSO levy are all included in the amount VAT is calculated on. This is why the tax cannot simply be worked out from your unit consumption alone.

Here is a simplified worked example for a two-month domestic electricity bill (figures are illustrative):

The steps are:

1. Add up all the taxable components — standing charge, usage, and the PSO levy — to get the net (ex-VAT) subtotal. Here that is €252.92.
2. Apply 9% VAT to the subtotal: €252.92 × 0.09 = €22.76.
3. Add the VAT to the subtotal to reach the gross total: €252.92 + €22.76 = €275.68.

The 9% calculator on this page does exactly this for whatever figures you enter, so you can check the VAT element of your own bill. Note that the PSO levy is quoted exclusive of VAT and then has the 9% applied on top like every other line — it is not VAT-free.

Inflation Relief & Support Schemes

The reduced VAT rate is one part of a broader set of measures used to cushion households against energy costs. Several schemes have operated alongside it:

• Universal electricity credits. During the peak of the energy crisis, the government issued one-off electricity credits applied directly to domestic accounts — for example, €250 in the 2024/25 winter, paid in instalments. However, with inflation easing, Budget 2026 did not include a new round of universal electricity credits, pivoting instead toward the longer-term VAT reduction as the main permanent support.
• Fuel Allowance. The Fuel Allowance, a targeted social welfare payment for eligible households, was increased by €5 per week in Budget 2026, with eligibility expanded from March 2026 to include recipients of the Working Family Payment.
• Carbon tax and its ring-fenced uses. The carbon tax rose to €71 per tonne of CO₂ under Budget 2026, in line with the trajectory to reach €100 per tonne by 2030. While carbon tax revenue increases the cost of certain fuels, it is partly ring-fenced to fund energy-efficiency measures, retrofitting grants (via the Sustainable Energy Authority of Ireland (SEAI)), and targeted social protection payments that help offset the impact on lower-income households.
• Retrofitting and efficiency grants. SEAI grant schemes support home insulation, heat pumps, and solar installations, reducing consumption and therefore the base on which both energy charges and VAT are calculated.

Together these measures shift the emphasis from temporary cash credits toward structural supports — a lasting reduced VAT rate plus targeted allowances and efficiency investment.

Frequently Asked Questions