Income Tax exemption: Department for Energy Security and Net Zero Electricity Bill Discount Scheme
Published 28 October 2026
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This publication is available at https://www.gov.uk/government/publications/tax-treatment-of-payments-under-the-department-for-energy-security-and-net-zero-electricity-bill-discount-scheme/income-tax-exemption-department-for-energy-security-and-net-zero-electricity-bill-discount-scheme
Who is likely to be affected
Households living within 500 metres of new or significantly upgraded electricity transmission infrastructure.
General description of the measure
This measure exempts payments made under the Department for Energy Security and Net Zero (DESNZ) Electricity Bill Discount Scheme from Income Tax.
Policy objective
The DESNZ Electricity Bill Discount Scheme is part of a wider community benefits package, which offers recognition to communities for the role they play in the delivery of new or significantly upgraded transmission network infrastructure and in the wider goal of achieving clean power by 2030.
This measure introduces a tax exemption for these payments to make sure that eligible households fully benefit from the scheme and to avoid administrative burdens and complexity related to the tax collection.
Background to the measure
In March 2025, the government announced its intention to establish an electricity bill discount scheme, to provide households closest to new electricity transmission network infrastructure with a discount of up to £250 per year, for up to 10 years.
The first payments to households are expected to be made in the first half of 2027.
Detailed proposal
Operative date
This measure will come into force on Royal Assent of Finance Bill 2026-27.
Current law
Payments under the DESNZ Electricity Bill Discount Scheme will be made using powers in the Planning and Infrastructure Act. Secondary legislation will laid by DESNZ alongside this to implement the scheme.
Currently, payments made under the scheme would be taxable as annual payments under section 683 of Income Tax (Trading and Other Income) Act 2005.
Proposed revisions
Legislation will be introduced in the Finance Bill 2026 to amend Part 6 of the Income Tax (Trading and Other Income) Act 2005 to exempt benefits resulting from proximity to new or upgraded transmission infrastructure from income tax made by the DESNZ Electricity Bill Discount Scheme.
The amendment will have effect for the tax year 2026 to 2027 and subsequent tax years.
Summary of impacts
Exchequer impact (£million)
| 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 | 2031 to 2032 |
|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure is expected to positively impact an estimated 122,000 to 161,000 households (in the period from scheme launch to 2044) by making sure they receive the full amount of the £250 discount from the DESNZ Electricity Bill Discount Scheme.
This measure is expected to impact individuals’ experience of dealing with HMRC as they will not need to engage with self-assessment for income from the DESNZ Electricity Bill Discount Scheme.
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure may apply to individuals regardless of their protected characteristics. HMRC does not hold data that it can use to assess whether there are any disproportionate impacts to protected groups.
Administrative impact on business including civil society organisations
This measure is expected to have no impact on businesses or civil society organisations.
Operational impact (£million) (HMRC or other)
There is no operational or delivery cost impact for this exemption.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review through communication with DESNZ and affected taxpayer groups.
Further advice
If you have any questions about this change, contact incometaxstructuremailbox@hmrc.gov.uk.