A reduction in VAT from 5% to 0% will be applied to domestic electricity bills on the Isle of Man from October, 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, 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.

As well as domestic customers, small businesses that already qualify for domestic energy VAT relief – where electricity consumption is below an average of 1,000 kWh per month – and are not VAT registered will also benefit.

Eligible charities and residential care homes will also qualify for the reduction.

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