Business energy for care homes

Business energy for care homes

Care homes need heat and hot water every hour of the year, so heating fuel is usually the biggest part of the bill, alongside laundry, catering, lighting and care equipment. The CIBSE benchmark for long-term residential buildings assumes over six times as much heating fuel as electricity per square metre. Most care homes also count as domestic use for VAT and Climate Change Levy, so the certificate you give your supplier matters as much as the price.

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How much energy do care homes use?

BenchmarkValueSource
Typical electricity use per m² (CIBSE TM46 long-term residential accommodation benchmark)65 kWh/m²/yearGOV.UK
Typical heating fuel use per m², usually gas (CIBSE TM46 long-term residential accommodation benchmark)420 kWh/m²/yearGOV.UK

Benchmarks describe typical buildings. Your own use depends on floor area, opening hours, equipment and how efficient your building is.

What do care homes pay per kWh?

There are no official prices by business type, but the government publishes what businesses pay by size of energy use. In Q2 2026, the smallest UK business electricity users (up to 20,000 kWh a year) paid an average of 38.36p per kWh, and those using 20,000 to 499,999 kWh paid 28.59p. The smallest gas users paid 9.31p per kWh. These government averages include standing charges and the Climate Change Levy, but not VAT. Your bill shows a unit rate plus a daily standing charge, so it won't match these all-in figures directly. See business electricity prices and business gas prices for every size band.

Choosing an energy contract for care homes

  • Give every supplier a VAT certificate. HMRC lists homes providing care for the elderly or disabled as domestic use, but suppliers need a signed certificate stating the exact percentage of qualifying use before they apply the reduced rate and the Climate Change Levy exclusion.
  • Check what each meter supplies. Offices, day centres or other non-residential parts on the same supply make it mixed use: if 60% or more is qualifying use, the whole supply gets the relief; below that, only the qualifying share does.
  • Demand is steady all year, so a fixed price can make budgeting simpler. For groups, lining up renewals across homes is easier to manage, but each site still needs its own up-to-date certificate.
  • Tell your supplier if the use of a building changes. HMRC's certificate includes a declaration that you will notify the supplier of any change in qualifying use.
  • After switching, check the first bills show the reduced VAT rate and no Climate Change Levy on qualifying supplies, and query any errors straight away.

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VAT and Climate Change Levy for care homes

HMRC Notice 701/19 treats energy used in homes providing care for the elderly or disabled, children's homes and hospices as domestic use. That means the reduced VAT rate (5%) instead of 20%, and exclusion from the main rates of Climate Change Levy under Excise Notice CCL1/3. Electricity for qualifying use in Great Britain is zero-rated for VAT from 1 October 2026 to 31 March 2027; Northern Ireland stays at 5% and gas is unchanged. Where part of a site is non-residential, the 60% mixed-use rule applies. Hospitals are specifically excluded from domestic use.

VAT on business energy · Climate Change Levy explained

How care homes use energy

Care homes are heat-led: the CIBSE TM46 long-term residential benchmarks are 420 kWh/m² of heating fuel against 65 kWh/m² of electricity a year, and BEES found non-electrical energy outweighed electricity in the health sector.

Space heating

Residents need warm rooms day and night. The Building Energy Efficiency Survey found heating was especially significant in the health sector, which includes nursing homes, because of overnight accommodation. GOV.UK

Hot water

Bathing, kitchens and cleaning. BEES found overnight accommodation drives hot water demand in health settings, and Legionella control means water must be stored hot. GOV.UK

Catering

Meals and drinks throughout the day. BEES found catering energy was high in the health sector, where food is provided for patients and residents. GOV.UK

Laundry

Bedding and clothing are washed and dried every day, often with commercial machines and dryers.

Lighting and care equipment

Corridors and communal areas are lit for long hours, often overnight for safety, and hoists, pressure mattresses and nurse call systems run continuously.

Occupancy, the age of the building and the number of en-suite bathrooms drive consumption. Because the home is occupied around the clock, there is little scope for overnight setback in residents' areas, so insulation, controls and boiler efficiency matter more than switch-off habits.

Ways care homes can cut energy use

Keep water safe, then keep the heat in

HSE says hot water should be stored above 60°C and distributed above 50°C to control Legionella, with thermostatic mixing valves keeping bath and shower water at no more than 44°C. Save energy by insulating tanks and pipework, not by lowering storage temperatures. GOV.UK

Service boilers every year

The Carbon Trust says gas boilers should be serviced once a year and oil boilers twice, and that a regularly serviced boiler can save as much as 10% on annual heating costs. Carbon Trust

Zone the heating

Separate time and temperature controls for bedrooms, lounges, offices and kitchens let you heat each area to what it needs, rather than running the whole building at the warmest setting. Carbon Trust

Insulate valves and flanges

The Carbon Trust says an uninsulated valve loses as much heat as a metre of uninsulated pipe. Removable insulation jackets can go back on after maintenance. Carbon Trust

Sensors in staff and storage areas

Occupancy sensors in stores, offices, sluice rooms and staff areas stop lights running when nobody is there, while keeping residents' areas lit as care needs require. Carbon Trust

FAQs

Do care homes pay 5% VAT on energy?

Energy used in homes providing care for the elderly or disabled counts as domestic use under HMRC Notice 701/19, so it qualifies for the reduced rate. Your supplier needs a certificate from you showing the percentage of qualifying use.

Do care homes pay the Climate Change Levy?

Not on supplies for domestic use. HMRC's Excise Notice CCL1/3 lists homes for the elderly and disabled among the domestic uses excluded from the main rates of CCL.

Is care home electricity zero-rated from October 2026?

Electricity for qualifying use in Great Britain, which includes domestic use such as residential care, is zero-rated from 1 October 2026 to 31 March 2027. In Northern Ireland the reduced 5% rate continues, and gas is unchanged.

Can we lower the hot water temperature to save energy?

Not below safe levels. HSE says hot water should be stored above 60°C and distributed above 50°C to control Legionella, with thermostatic mixing valves limiting bath and shower water to 44°C for vulnerable people.

How much energy does a care home use per square metre?

The CIBSE TM46 benchmark for long-term residential accommodation is 65 kWh of electricity and 420 kWh of heating fuel per square metre a year. Compare your annual use divided by floor area against those figures.

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