Business energy for charities and places of worship
Business energy for charities and places of worship
Charities, community buildings and places of worship often use energy in bursts: heating a hall for a service or event, then leaving it cold. The Church of England says heating makes up over 80 per cent of a church's energy use. The biggest money question is often tax, because energy a charity uses for non-business activities can qualify for reduced-rate VAT and be excluded from the Climate Change Levy.
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What do charities and places of worship 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 charities and places of worship
- Low, irregular use means standing charges make up a bigger share of the bill, so compare the total annual cost at your real usage rather than unit rates alone.
- Give your supplier a signed VAT certificate showing the exact percentage of qualifying (non-business) use. HMRC expects suppliers to hold one before applying the reduced rate to a mixed-use supply.
- Many small charities are microbusinesses for energy (for example fewer than 10 employees and turnover or balance sheet of no more than £2 million, or low usage), so Ofgem's 12-month limit on rollover contracts applies.
- Tell your supplier if your use changes, for example if you start charging admission or open a shop. The certificate includes a promise to notify the supplier of any change in qualifying use.
- Make sure whoever signs the contract has the trustees' or church council's authority, and record the end date so the building isn't left on out-of-contract rates.
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VAT and Climate Change Levy for charities and places of worship
HMRC Notice 701/19 says fuel and power used by a charity for non-business activities gets the reduced VAT rate (5%). Electricity for qualifying use in Great Britain is zero-rated from 1 October 2026 to 31 March 2027; Northern Ireland stays at 5% and gas is unchanged. If 60% or more of a supply is for qualifying use the whole supply gets the relief; below that, it is apportioned. The same non-business use is excluded from the main rates of Climate Change Levy (Excise Notice CCL1/3). HMRC gives admission charges and selling donated goods as examples of business activities, so a charity shop or paid attraction normally pays 20%. HMRC also notes that some churches don't have to register with the Charity Commission but are still charities.
VAT on business energy · Climate Change Levy explained
How charities and places of worship use energy
Heat-led: BEES found non-electrical energy made up 69 per cent of energy use in the community, arts and leisure sector, which includes places of worship and community centres, and the Church of England puts heating at over 80 per cent of a church's energy use.
Large, high-ceilinged spaces are expensive to heat from cold for a few hours a week. The Church of England says heating people rather than entire spaces is often more efficient. churchofengland.org
Buildings left empty still need frost protection for plumbing in cold weather, and historic interiors may need heating that keeps humidity stable to protect fabric and artefacts. churchofengland.org
Worship spaces, halls, offices and external or floodlighting, often switched on for short periods at a time.
Community cafes, lunch clubs, food banks and hall kitchens add cooking, refrigeration and hot water loads.
Charity offices, shops and warehouses use energy much like any other business premises, but the VAT treatment can differ depending on whether the activity is business or non-business. GOV.UK
How often the building is used, and how it is heated, matter most. Heating a large space for a few hours a week wastes energy warming air that people never feel, while BEES found clubs and community centres that open for long hours have high heating energy use per square metre.
Ways charities and places of worship can cut energy use
The Church of England says localised heating such as pew heaters or infrared panels can provide comfort without wasting energy, especially in large, high-ceilinged churches. churchofengland.org
The Church of England warns that churches often waste energy by heating air instead of people, ignoring humidity or rushing decisions. Its heating principles, checklist and options appraisal help you plan. churchofengland.org
Even when the building is unused, keep enough heat on in cold weather to protect plumbing, rather than turning heating off completely. churchofengland.org
The Church of England's Energy Footprint Tool takes a few minutes and calculates your footprint from electricity, gas and oil use, giving you a baseline to track. churchofengland.org
LEDs last far longer than older lamp types, which matters in high, hard-to-reach fittings, and occupancy sensors stop lights running in empty rooms and toilets. Carbon Trust
An audit identifies which measures suit your building. The Church of England's net zero guidance suggests commissioning one for your church. churchofengland.org
FAQs
Do charities pay 5% VAT on energy?
On energy used for non-business activities, yes. HMRC Notice 701/19 applies the reduced rate to fuel and power a charity uses in its non-business activities, and the whole supply qualifies if at least 60% is for that use.
Does a church pay VAT on its energy?
If the church is a charity and the energy is used for non-business activities such as worship, it qualifies for the reduced rate. You will need to give your supplier a certificate showing the percentage of qualifying use.
Is charity electricity zero-rated from October 2026?
Electricity for qualifying use in Great Britain, which includes charity non-business use, is zero-rated from 1 October 2026 to 31 March 2027. Northern Ireland stays at 5%, and gas is unchanged.
Do charity shops get reduced-rate VAT on energy?
Normally not. HMRC gives selling donated goods as an example of a business activity, so a charity shop's energy is usually charged at 20%.
Do charities pay the Climate Change Levy?
Not on supplies for non-business use. Excise Notice CCL1/3 excludes a charity's non-business use from the main rates of CCL, using the same VAT certificate; business use such as a shop is still charged.
What is the most efficient way to heat a church?
The Church of England says heating people rather than whole spaces is often more efficient in large, high-ceilinged buildings, for example with pew heaters or infrared panels. There is no single answer, so plan around how the building is used.
Sources
- HMRC, Fuel and power (VAT Notice 701/19)
- HMRC, VAT Fuel and Power Manual VFUP2400 (charity non-business use)
- HMRC, Climate Change Levy reliefs and special treatments (Excise Notice CCL1/3)
- Church of England, Heating (ChurchCare guidance)
- Church of England, Net zero carbon church
- BEIS (now DESNZ), Building Energy Efficiency Survey 2014-15: Overarching Report
- Carbon Trust, Hospitality sector guide (CTV058 v3, 2018), lighting
- Ofgem, Set up a business energy contract
- Gas and Electricity Regulated Providers (Redress Scheme) (Amendment) Order 2024 (microbusiness criteria)
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