Small business energy at a glance
- No price cap: business energy prices are agreed per contract, not capped by Ofgem.
- Best time to compare: 6 to 12 months before your contract end date.
- Typical contract: a fixed price for one to five years, with no cooling off period.
- VAT: usually 20%, or 5% for very low use, with 0% on qualifying electricity until 30 June 2027.
- Your protection: Ofgem rules for micro and small businesses, plus free access to the Energy Ombudsman.
- The key detail: your contract end date. Without it, nobody can quote you properly.
How is small business energy different from home energy?
Small business energy is bought on a commercial contract. That changes a few important things.
| Home energy | Small business energy | |
|---|---|---|
| Price cap | Yes, set by Ofgem every quarter | No price cap |
| How prices are set | Published tariffs | Quoted for your business and usage |
| Cooling off period | 14 days | None |
| Contract length | Variable, or fixed for 12 to 24 months | Usually fixed for one to five years |
| VAT | 5% on gas, 0% on electricity until 30 June 2027 | Usually 20%, 5% for very low use |
| Climate Change Levy | Not charged | Charged on most supplies |
| Leaving early | Exit fees on some fixed deals | Usually locked in until the end date |
Because there is no cap, two cafés on the same street can pay very different prices for the same energy. The difference usually comes down to when each one renewed and whether they compared.
Is my business a micro or small business?
Ofgem uses two definitions, and they decide which protections you get. You only need to meet one test in each.
| Microbusiness | Small business | |
|---|---|---|
| Staff and size | Fewer than 10 employees and turnover or balance sheet up to €2 million | Fewer than 50 employees and turnover up to £6.5 million or balance sheet up to £5 million |
| Electricity use | Up to 100,000 kWh a year | Up to 200,000 kWh a year |
| Gas use | Up to 293,000 kWh a year | Up to 500,000 kWh a year |
Most shops, cafés, salons, barbers, takeaways and small offices are microbusinesses. A busy restaurant or small manufacturer may fall into the small business band instead.
What rules protect small businesses?
Ofgem extended its business protections in 2024. The main ones for smaller firms are:
- Fair treatment for everyone. Since July 2024, suppliers must treat businesses of every size fairly and clearly.
- Broker fees shown. For contracts signed since 1 October 2024, any broker fee must appear in your contract terms.
- Approved brokers only. Suppliers can only work with brokers who belong to a redress scheme when selling to small businesses.
- Free complaints help. Since December 2024, small businesses as well as microbusinesses can take unresolved complaints to the Energy Ombudsman.
- Renewal rules for microbusinesses. Your supplier must send renewal terms before your deal ends, and any rollover cannot last longer than 12 months.
How much energy does a small business use?
It depends on your trade far more than your size. A small office might use a few thousand kWh of electricity a year, while a café or takeaway with fryers, ovens and fridges running all day can use many times that. Your usage in kWh is printed on every bill, and it is the figure suppliers use to price your quote.
If your use is very low, check your VAT. Businesses using no more than 33 kWh of electricity or 145 kWh of gas a day should pay 5% VAT rather than 20%, as set out in HMRC VAT Notice 701/19. Our guide to VAT on business energy explains the limits and the temporary 0% rate on qualifying electricity.
How to get a cheaper small business energy deal
- Find your contract end date on a bill, your contract or your online account.
- Gather a recent bill for each meter, so quotes match your real usage.
- Compare suppliers early, ideally 6 to 12 months before your end date.
- Look at the whole price. Compare the unit rate, the standing charge, the contract length and any broker fee.
- Choose fixed or flexible. Most small businesses fix for one to three years so the bill is predictable.
- Confirm the start date so the new deal begins the day after the old one ends, with no gap on expensive rates.
Money saving tips for small businesses
- Read your meters monthly so you are billed on actual use, not estimates.
- Ask for a smart meter if you do not have one. It makes billing accurate and shows when you use the most.
- Switch off at the wall at closing time. Signs, coffee machines, display fridges and heaters on timers often run all night.
- Service heating and refrigeration once a year. Dirty coils and poor seals make equipment work harder.
- Move to LED lighting in the shop floor, kitchen and signage. It cuts use and lasts far longer.
- Avoid out of contract rates. This one step usually saves more than every other tip combined.
Fixed or flexible: which suits a small business?
| Fixed price | Flexible or variable | |
|---|---|---|
| How the price works | Unit rate and standing charge locked for the term | Price moves with the market or the supplier’s rates |
| Budgeting | Easy, the price does not change | Harder, bills can rise or fall |
| Best for | Most micro and small businesses | Larger users who can manage market risk |
| Risk | You miss out if prices fall | You pay more if prices rise |
For most small firms, a fixed deal is the safer choice. Larger energy users sometimes buy in a more flexible way, which we explain in our guide to business energy procurement.
Should a small business use a broker?
A good broker saves you time. They check prices across suppliers, handle the paperwork and remind you before your next renewal. Read what a business energy broker does to see how they are paid and what to ask. You can also see typical business electricity rates, compare business gas prices and read how business energy renewals work.
Get a free small business energy quote
Tell us when your contract ends using the form above. A trusted UK broker will compare suppliers for your business and come back with quotes, free and with no obligation. Not sure of your end date, or already out of contract? Tick the box on the form and the broker will check for you.