Energy Secretary Miatta Fahnbulleh has pledged to protect families as Labour’s removal of VAT from household electricity bills takes effect, providing some relief for families facing higher energy costs this winter.
The government says the measure, introduced on 1 October, keeps Ofgem’s annualised energy price cap around £45 lower than it would otherwise have been. Actual savings depend on electricity consumption and tariff prices.
Fahnbulleh: ‘I know energy price rises weigh heavily on homes’
Fahnbulleh acknowledged the pressure on household budgets, saying: “I know energy price rises weigh heavily on homes across the UK this winter.” She said the government would continue examining further support while pursuing its clean power programme to bring down bills over the longer term.
Price cap rises by 4%
The tax cut comes as Ofgem’s price cap rises by 4% for October to December, reaching £1,723 on an annualised basis for a typical household using gas and electricity and paying by direct debit. That figure already incorporates the electricity VAT reduction.
The cap limits unit prices and standing charges, rather than placing a ceiling on a household’s total bill. What families pay still depends on how much energy they use. Ofgem attributes the increase to higher wholesale gas prices linked to the conflict in the Middle East.
The temporary zero VAT rate applies to qualifying household electricity supplies in England, Scotland and Wales until 31 March 2027. Gas remains subject to 5% VAT, as does qualifying electricity in Northern Ireland.
Households do not need to apply for the reduction. It covers electricity consumption and standing charges, including on fixed tariffs and prepayment meters, with suppliers applying the change through their billing arrangements.
