Manufacturing the magnetic cores in electrical machines impacts the magnetic performance of the electrical steel by inducing stresses near the cutting edge. In this paper, energy loss behaviour in non-oriented electrical steels punched with different cutting clearances before and after annealing is investigated. An experimental shear cutting tool was employed to punch the ring-shaped parts from electrical steels in a finished state with four different values of cutting clearance corresponding to 1%, 3%, 5%, and 7% of the sheet thickness. The effect of cutting clearance on the magnetic losses is derived and analysed by the statistical theory of losses and associated loss separation concept including the analysis of movable magnetic objects. In this framework, this paper assesses the combined effect of cutting clearance, frequency, and heat treatment on the hysteresis loops and iron losses in non-oriented FeSi electrical steels. Measurements have been performed from quasi-static to 400 Hz at peak induction Bp = 1.0 T. Both states before and after heat treatment have been considered. The excess loss is observed as the most sensitive loss component to cutting clearance and its magneto–structural correlation is quantified.