Government announce VAT cut from electricity bills
Earlier this month, the new Government announced a reduction for all domestic electricity bills from 1st October 2026. This will be achieved by removing the 5% VAT from electricity bills, for 6 months, starting on 1st October 2026.
What does this mean for you?
The reduction will apply only to electricity; gas bills will still carry their 5% VAT duty. This will offer more relief to households who are all electric and/or higher energy users, but the estimated saving for an average household is £45 for the 6-month period. This will feel like the equivalent of a 4.8% reduction on people’s bills.
This saving will be deducted for customers on any tariff type – Standard Variable, Pay-As-You-Go (PAYG) and Fixed or Time of Use (TOU) tariffs. Energy companies have been instructed to pass this saving onto all domestic customers billing. The same reprieve will also benefit charities, residential care homes, and small businesses who are not registered for VAT and qualify for the domestic energy VAT relief scheme.
Further energy price increases on the horizon
While this will offer some support to households in the short term over this winter, it is expected that there will be an increase in the Energy Price Cap by around 5.8% on 1st October – meaning this will be less impactful for households who remain on their suppliers’ default Standard Variable tariff (for example, most PAYG customers). This also comes shortly after a 13.5% hike on the 1st July Price Cap – meaning the average household is still paying around £142 or 8.26% more for their energy compared to the energy Price Cap from July 2025.
While around 40% of households have their energy accounts on a fixed term deal, this still leaves more than half of households liable to the ups and downs of the energy Price Cap, and Standard Variable pricing.
You can read more about this announcement on the following links:
https://www.bbc.co.uk/news/articles/cjwxll8jyz8o
https://www.moneysavingexpert.com/news/2026/07/electricity-bills-vat-cut-martin-lewis-analysis/
Need some help?
Do you need support on how these changes may affect you? Please get in touch with our friendly Energy Advice Team on 01752 477117, email us on energyteam@plymouthenergycommunity.com or visit us at our Energy Advice Hub on Union Street, open 3 days a week.
(All stated figures correct as of 27/07/2026)