Households across the UK will see a little more room in their budgets from today as the government scraps VAT on domestic electricity bills, according to freshnews.uk reporting on official announcements. The move is expected to shave roughly £45 off the annual energy price cap, offering some relief as winter approaches.
Key points
- VAT removed — electricity bills no longer carry the tax from today.
- Price cap impact — the cap is £45 a year lower than it would have been.
- Long-term plan — a new publicly owned body, Great British Grid, will be created within Great British Energy.
- Wider measures — bus fares capped at £2 from January and business rates cut for pubs, clubs and music venues.
The Chancellor of the Exchequer, John Healey MP, said the tax cut would help keep energy bills down a bit as winter sets in. He described it as action on cost of living pressures to give people breathing space over the next few months, while longer-term changes are made to shield the country from global shocks.
"I know energy price rises weigh heavily on homes across the UK this winter," said Miatta Fahnbulleh MP, Secretary of State for Energy Security and Net Zero. "From today, our VAT cut will give households some much needed breathing space."
Around a third of households are on fixed tariffs and so are not directly affected by the price cap. The government expects suppliers to pass on the VAT reduction to these customers as well, meaning their bills could fall overall. People are encouraged to shop around for the best deal.
The cut is part of a series of 'everyday fixes' from the Prime Minister, which also includes capping bus fares at £2 from January, banning fake discounts, ending subscription traps, cracking down on school uniform rip-offs and cutting business rates for pubs, social clubs and high-street businesses.
For the longer term, the Prime Minister has committed to bringing energy costs in line with other European countries within ten years by introducing greater public control. A new publicly owned body within Great British Energy, called Great British Grid (GB Grid), will be created alongside reforms to improve competition, speed up grid connections for businesses and lower costs. Other measures include delivering Sizewell C and investing in homegrown clean energy.
Savings will vary depending on energy use, but the cut is designed to help families keep more money as temperatures drop and energy consumption typically rises. The move follows a rise in global energy costs linked to conflict in the Middle East and builds on the £150 of costs removed from bills earlier this year and the expansion of the £150 Warm Home Discount to around six million households.
What it means in practice
For most households, the VAT cut will mean a modest reduction in electricity bills – around £45 a year off the price cap. If you're on a fixed tariff, check with your supplier whether they'll pass on the saving. It's also worth reviewing your energy deal to make sure you're not paying over the odds as winter sets in.
- Check your bill — the VAT cut should appear automatically for those on standard tariffs, but fixed-tariff customers may need to confirm with their supplier.
- Shop around — with the price cap lower, compare deals to see if you can save more.
- Long-term changes — the new Great British Grid and other reforms aim to lower costs over the next decade, but no immediate action is needed from households.
