Is business energy cheaper than domestic energy?

Many of our customers ask, “is business energy cheaper than domestic energy?” This question isn’t surprising because, according to the Office of National Statistics, more than 2.1m people now work from home.

Many of these are what we call SOHOs (single owner home operator businesses) and micro businesses with 1 to 9 employees. Sometimes they are landlords, managing a property portfolio from a home office, plumbers or tradesmen, or they’re freelance consultants. Often they’re working from home, or have an office in a home or converted dwelling.

In general, business rates are intended for commercial premises (from high street shops to commercial buildings, for example). And a good rule of thumb is: unless you’ve got a commercial mortgage, you shouldn’t be signing up for business energy rates.

5 things to be aware of when comparing business energy and domestic energy:

  • Business energy rates are not always cheaper: At lower volumes of energy (especially for those working from small premises, and homes) business energy rates may not be cheaper. For business customers who consume larger volumes (large commercial premises and or ‘half hourly’ metering, for example) prices do tend to be cheaper than domestic.
  • No cooling off period for business contracts: Domestic energy contracts have a 14 calendar day cooling off period, so that if you change your mind you can walk away from a disadvantageous deal. Business contracts have no such cooling off period: once you’ve signed, you’re committed.
  • VAT: business energy incurs 20% VAT, unless an exemption applies (depending on your type of business). Domestic energy is subject to the lesser rate of 5% VAT.
  • No dual fuel for business: Suppliers frequently offer bundled dual fuel (gas and electricity) deals. Suppliers do not offer dual Fuel options in the business energy market (as the volumes of energy being sourced are less predictable than for regular domestic supply).
  • Signing up for business rates for your home could affect your home mortgage and insurance: Some insurance and mortgage providers will consider your home to be a commercial premise if you work from home regularly, and or convert part of your home into an office or shop. Signing up for business energy may add towards assessing whether the building has repurposed to a commercial place of business. This could make your domestic mortgage and insurance void.

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Disclaimer: this short piece is intended to give an insight, rather than be tailored advice to everyone.  If you’re not sure or want advice about comparing and switching business energy relevant to your situation, please get in touch with us.