How to save money on care home energy bills

This guide takes each step in order, starting with the ones that cost nothing. It also shows where Legionella and infection control rules mean you should not cut back.

Why are care home energy bills so high?

Care homes use energy around the clock. Residents are often older or frail, so rooms are kept warmer than in a typical home, and many people spend most of the day indoors. Add a laundry that runs every day, a kitchen serving meals from breakfast to supper, lifts, nurse call systems and medical equipment, and demand never drops to zero.

In the care homes reviewed through our partner network, heating and hot water usually make up the largest share of spend. This is roughly how a typical independent home's energy spend breaks down:

Source: Assured Energy partner network averages for independent UK care homes. Your home will differ.

That breakdown sets the order of this guide: tax and price first, because they cost nothing to fix, then heating, hot water and laundry, where most of the energy goes.

Step 1: Check you are paying the right VAT rate

This is usually the biggest and quickest saving, and it costs nothing to fix.

Under HMRC's VAT Notice 701/19, fuel and power used for a "relevant residential purpose" is charged at a reduced rate. That includes homes providing residential accommodation with personal care for people who need it because of old age, disability, past or present dependence on alcohol or drugs, or mental disorder. Most residential and nursing homes fall within this definition.

What VAT rate should a care home pay on energy?

The temporary zero rate covers qualifying supplies of electricity in Great Britain only. Gas is not included, and Northern Ireland stays at 5%. HMRC has confirmed that the rules on which supplies qualify have not changed. If your electricity qualified for 5% before 1 October, it should now be zero-rated.

The reduced rate is not automatic

Suppliers charge 20% unless you tell them otherwise. To get the reduced rate, you complete a VAT declaration for each site (some suppliers call it a VAT certificate) and send it to your supplier. If your October electricity bill still shows 20% or 5% VAT, contact your supplier now.

What if part of the building is not residential?

Offices and other non-qualifying areas can affect the calculation. If at least 60% of the fuel and power is for qualifying use, the whole supply is treated as qualifying. Below 60%, only the qualifying percentage gets the reduced rate. You state the percentage on your declaration.

How much difference does it make?

An illustrative care home using £3,000 of electricity and £1,500 of gas a month, before VAT:

Even at 5% on both fuels, the home would save £675 a month, or £8,100 a year. Most residential care is exempt from VAT, so most care homes cannot reclaim the VAT they pay on energy. That is why the rate on the bill matters so much.

Can you get back VAT you have overpaid?

Often, yes. If your home qualified but was charged 20%, ask your supplier to re-bill past invoices at the correct rate. Suppliers correct overcharged VAT through HMRC, and the time limit for those corrections is four years. Expect to show that the site qualified throughout the period. If your business is VAT-registered and reclaimed any of that VAT as input tax, speak to your accountant before accepting a refund.

Read our guide to business energy VAT, or check your care home's VAT rate as part of a free audit.

Step 2: Stop paying Climate Change Levy you don't owe

The Climate Change Levy (CCL) is an environmental tax added to business gas and electricity bills. Supplies for domestic use are excluded from CCL. Under the Finance Act 2000, a home providing residential accommodation with personal care for people in need because of old age or disability counts as domestic use.

In practice, if your energy qualifies for reduced-rate VAT, it should not carry CCL either. The same 60% rule applies to mixed-use sites, and most suppliers' VAT declaration forms cover CCL too, so one form normally fixes both.

Look for a line marked "Climate Change Levy" or "CCL" on your bill. If it appears on a supply that qualifies, ask your supplier to remove it and correct past bills.

Step 3: Get a better energy contract, and keep it

Once the tax is right, the next saving is the price you pay for each unit and each day.

• Know your end date and notice period. Many contracts need written notice before you can leave. Put the date for every site in the diary.
• Avoid out-of-contract and deemed rates. If a contract ends with nothing agreed, or you take over a building without one, the supplier charges out-of-contract or deemed rates. These are usually much higher than negotiated prices.
• Start three to six months early. Wholesale prices change daily. Shopping early gives you time to fix when the market dips, rather than taking whatever is offered in the last week.
• Buy for a 24/7 building. A care home uses energy steadily day and night, so standing charges and the overall contract structure matter as much as the headline unit rate.
• Check capacity charges. Larger homes on half-hourly meters pay for an agreed supply capacity (kVA). If that figure sits well above your real peak demand, you may be paying for capacity you never use.
• Group your sites. If you run more than one home, aligning end dates and buying together usually gets better terms.
• Read every bill. Look for estimated readings, the wrong meter number, and VAT or CCL errors. Our guide to what each line on your bill means explains the main charges.

If you are part-way through a contract and prices have fallen, ask your supplier about a "blend and extend" deal, which can lower your rate in return for a longer term. Read more about business energy contracts and renewals.

Step 4: Cut heating costs without making residents cold

Residents' comfort and health come first. The aim is to stop heating empty rooms and stop heat escaping, not to turn the whole building down.

• Heat by zone and by time. Lounges, dining rooms and activity rooms are used at set times. Give them their own heating schedules so they are not heated overnight. Bedrooms need individual control.
• Fit tamper-resistant radiator valves. Thermostatic radiator valves (TRVs) with sensible upper limits keep bedrooms comfortable without radiators running flat out.
• Service and tune the boiler. Ask your heating engineer about weather compensation and optimum start controls. They adjust boiler output to the outdoor temperature and pre-heat only for as long as needed.
• Consider a building management system (BMS) in larger homes, so you can see and change heating settings across the building from one place.
• Keep the heat in. Insulate pipework in plant rooms and ceiling voids, top up loft insulation, draught-proof doors and windows, and make sure self-closing doors close.
• Keep radiators clear of furniture and long curtains.
• Agree minimum room temperatures with your care team and record them. Any change to heating should fit residents' care plans.

Step 5: Save on hot water, not on safety

Care homes are high-risk settings for Legionella. HSE guidance is that hot water cylinders should store water at 60°C or higher, and hot water should be distributed at 50°C or higher. Thermostatic mixing valves (TMVs) should be fitted close to outlets where there is a scald risk. Your Legionella risk assessment sets the rules for your building.

So the savings come from losing less heat and wasting less water, not from lower temperatures:

• Insulate cylinders, calorifiers and hot water pipework, including the circulation loop.
• Fix dripping taps and faulty TMVs quickly.
• Fit flow-regulated shower heads and taps where they suit residents' needs.
• Keep cylinders and boilers serviced, because scale makes them work harder.
• When replacing equipment, size hot water storage to real demand.

If anyone suggests turning down stored hot water to save gas, check it against your Legionella risk assessment first.

Step 6: Run the laundry more efficiently

The laundry runs every day and is often the second-largest use of energy in a care home. Infection control limits what you can change. Soiled and infected linen needs a thermal disinfection wash, which HSE describes as holding 65°C for at least 10 minutes or 71°C for at least 3 minutes. Do not lower those temperatures to save money.

Savings that do not affect infection control:

• Run full loads but never overload. An overloaded machine does not wash or disinfect properly.
• Follow your infection prevention policy on which items need a disinfection wash, and which can go on a standard cycle.
• Spin at the highest speed the fabric allows. Removing water in the washer costs far less than drying it out in the dryer.
• Clean dryer lint filters every cycle and service machines on schedule.
• Compare running costs, not just prices, when machines are due for replacement. Modern machines with validated disinfection cycles and better spin extraction use less energy per load.
• Use cheaper times of the day. If your tariff has time-of-use rates, run dryers in the cheaper periods where staffing allows.

Step 7: Lighting and kitchen

Lighting and catering are smaller shares of the bill, but the fixes are simple and quick.

• Switch to LEDs. Replace any remaining fluorescent and halogen lights.
• Fit presence sensors in stores, staff areas, sluice rooms and toilets.
• Keep night lighting safe. Corridors and resident areas often need light at night to help prevent falls. Dimmed LED night lighting is safer and cheaper than switching lights off.
• Set kitchen switch-on times so ovens and hobs are not left on between meals.
• Look after fridges and freezers. Keep door seals in good condition and defrost on schedule.
• Run dishwashers on full loads.

Step 8: Measure what you use

You cannot manage what you cannot see.

• Use your meter data. Smart and half-hourly meters show usage hour by hour. Look at the overnight base load and check that everything running between midnight and 5am needs to be.
• Track kWh per occupied bed each month, so you can compare homes and spot changes early.
• Sub-meter the laundry and kitchen in larger homes to see where energy actually goes.
• Name an energy champion on each shift to check heating schedules, report faults and close windows when the heating is on.

Longer-term improvements worth costing

Once the quick wins are done, bigger projects can cut usage further: replacing old boilers, heat pumps, solar panels, better glazing and insulation. Costs and payback periods vary widely from building to building, so get independent figures before you speak to installers.

A good starting point is BRE's free Care Home Energy Efficiency Tool. It asks questions about your building and recommends improvements, with estimated costs, savings and payback periods. It currently models care homes with fewer than 60 bedrooms.

Your care home energy saving checklist

Work down the list in order. The first five actions cost nothing.

How Switchgrid helps care homes

Switchgrid is a business energy consultancy based at Friars Mill in Leicester, working with independent care homes across the UK in partnership with Assured Energy. Our free care home energy audit covers:

• a VAT and CCL check, including whether your electricity should now be zero-rated and whether past bills can be corrected
• a review of your current contract, unit rates and standing charges
• a plain-English breakdown within 24 to 48 hours.

Changing suppliers does not change your physical supply, so heating, hot water and care carry on exactly as before. There is no obligation to switch. The audit is free; if you choose a new contract through us, the supplier pays us a commission.