New Prime Minister Andy Burnham has announced that VAT will be removed from household electricity bills from 1 October 2026.
The move, which will see 5% VAT reduced to zero, is expected to shave around £45 off the typical annual electricity bill this winter, and will be welcome news for those who already go to considerable lengths. Save energy at home And reduce their monthly bills.
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Speaking less than 48-hours into his new role, Prime Minister Andy Burnham said: ‘I said I wanted to give people breathing room, and that’s what I’m announcing on my second day as Prime Minister.
‘We are taking urgent action to reduce taxes on energy bills, put more money in people’s pockets and restore hope.
‘Cutting VAT on electricity bills is expected to reduce the annual Ofgem price cap by around £45 in October.’
The cuts will be passed on to millions of households in England, Wales and Scotland by their suppliers and are expected to include both fixed and standard variable tariffs. While some energy bill relief measures have been available only to certain beneficiaries in recent years, no such eligibility criteria has been announced for this VAT reduction.
Autumn’s drop in energy bills will be welcomed by those who use energy-hungry appliances such as tumble dryers.
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The rules work slightly differently in Northern Ireland, but the government has said the NI Executive will receive comparable funding to enable it to support households in the same way in Northern Ireland.
While the energy price cap figure for the period between 1 October and 31 December 2026 is yet to be announced by energy regulator Ofgem, current forecasts from analysts Cornwall Insight The cap is approximately £1,849 (based on current typical domestic consumption values of 2,700 kWh per annum for electricity and 11,500 kWh per annum for gas). As a comparison, the current energy price cap is set at £1,862.
The official price cap figure for autumn will be announced on 26 August, and will be calculated using the new specific local consumption values to reflect the reduction in average household energy consumption.
Is it enough to help struggling families?
Is an average annual reduction of £45 enough to help households struggling with high electricity bills? In isolation, maybe not. But it’s a step in the right direction to provide some relief, especially at a time when households are using more power-hungry appliances, such as tumble dryers.
When combined with other electricity saving measures, simply Shutting down vampire devices For more involved solutions such as investments Plug-in solar panels (when they become available) or a Rooftop Solar Panel ArrayHouseholds can also reduce their energy consumption to lower their bills.
If you’re still worried you won’t be able to pay your energy bills in the colder months, contact your supplier in the first instance. If applicable they may be able to help you move to a cheaper tariff or check your eligibility for further assistance.
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