The temporary zero VAT rate for electricity that is intended for domestic and certain charity use was due to end on 31 March 2027. However, the zero rating will now be extended for a further three months, to come to an end on 1 July 2027.

Payment of VAT and issuing VAT invoices

In an attempt to improve the timeliness of VAT payments, the government plans to make it mandatory to have a direct debit in place to pay VAT liabilities by 1 April 2029. Businesses will still be able to pay by alternative methods such as bank transfer in advance of the direct debit being taken, with any balance remaining then being taken by direct debit. The risk of a misallocated payment meaning the full rather than remaining unpaid amount would be taken by direct debit may make businesses decide against any such earlier payments.

It is also still intended that all VAT invoices should be issued in a specific electronic format by 1 April 2029.

Land sold to Housing Associations

Currently, land sold to housing associations is generally exempt from VAT. When land has been opted to tax and so would otherwise be subject to VAT, housing associations can already give a certificate to a seller requiring them to disapply or put aside that option to tax and so put the land back to being VAT exempt. However, the government plans to go one step further and make sales of land to housing associations zero rated. This has the key advantage that the landowner selling the land can retain any VAT they have claimed back in respect of the land, including that on preparatory ground works or on any selling costs, which presumably the government hopes will enable housing associations to acquire land at a lower cost.

VAT Treatment of Medical Staff

The 2025 Isle of Wight VAT case provided clarity and a favourable VAT treatment for the provision of medical deputies (locum doctors). It effectively found that the supply of a GMC-registered locum doctor should be exempt from VAT whether the locum was provided by an agency, as a self employed person or via a limited company.

However, the government plans to amend legislation to remove the specific VAT exemption for the provision of a medical deputy (locum) with effect from 1 May 2027.

It is expected that after this date, locums and locum agencies will have to consider whether they are providing medical services capable of qualifying as VAT exempt or providing temporary staff, which would be standard rated.

We hope the tests and parameters that HMRC expects locums and agencies to use will be clarified when the legislation is amended.

Change to VAT Treatment of Services Bought in from Overseas

When a UK business acquires most services from overseas, they are required to “reverse charge” the service they buy in. This means they account for the output VAT on their VAT return as if they were selling the service, and then claim the VAT back if they are eligible to do so.

This treatment will continue, but from April 2027 where the UK business acquiring the service is not VAT registered, the overseas business will be required to account for UK VAT on the service. This will mean that HMRC will begin to collect the UK VAT on services bought in by businesses not registered for VAT, who would previously have been able to acquire that service VAT free. This might affect small unregistered businesses such as B&Bs who use booking agents which are based overseas.

Selling via Online Marketplaces

In an anti-avoidance measure, online marketplaces will effectively become responsible for policing the VAT registration requirements of those using them. Where a seller makes sales of over the VAT registration threshold (£90,000) on a particular marketplace, the online marketplace will be responsible for collecting output VAT on their sales. This measure is expected to be put in place with effect from October 2027.

Fuel Duty

Perhaps unsurprisingly, the 5p a litre increase in fuel duty, to reverse the “temporary” reduction, has been postponed for a further six months, until 1 July 2027.

Similarly, the 3.7p a litre reduction in red diesel duty has been extended for the same period.

Please click here to go back to our full Autumn Budget 2026 analysis.