Martin Lewis: How the new flat rate £200 energy bill loan really works

MWT

Malchester said:

My question is, paying it back at £40 a year from April 2023, how will it be done from those on fixed tariffs? Can the rates be changed when I have signed up for a fix to collect the money, or will it be added to each bill as a separate item (as VAT is currently shown on bills)?

If you check the T&Cs they all reserve the right to add additional taxes and other imposed charges, so it will just get added to your bill.

Also, you didn't sign up for a 'fix to collect the money', you signed up for a fixed kWh charge and standing charge, the amount they collect from you can and will vary if your actual consumption varies from the initial estimate. 

Malchester

MWT said:

Malchester said:

My question is, paying it back at £40 a year from April 2023, how will it be done from those on fixed tariffs? Can the rates be changed when I have signed up for a fix to collect the money, or will it be added to each bill as a separate item (as VAT is currently shown on bills)?

If you check the T&Cs they all reserve the right to add additional taxes and other imposed charges, so it will just get added to your bill.

Also, you didn't sign up for a 'fix to collect the money', you signed up for a fixed kWh charge and standing charge, the amount they collect from you can and will vary if your actual consumption varies from the initial estimate. 

Thanks. I realise that the fix is the Kwh rate not the actual fixed amount per month. Don't think I said that I though it was a fixed amount regardless of consumption. I understand now that they can add the amount somehow to the charges. Thanks

t0rt0ise

I can't wait for the likes of Symbio to re-emerge and give us some competitive deals. Then we can watch them collecting the forty quids and being reprimanded infinitum by Ofgem for not handing it over. Happy days!

Gerry1

Symbio, no.  Zog and Yorkshire Energy, yes.

cherrink

I have looked through a few posts and read the main article but there seems to be no mention of VAT on here. If they increase bills by £40 and that is VAT able then thats a really expensive loan frankly and people should be allowed to refuse. Surely there are better and fairer ways to sort this. There was talk of reducing levvies for example and it certainly used to be the case that VAT was not charged on essentials.

wrf12345

It is a loan so it does not send the treasury mandarins running around like headless chickens, how they get it back isn't really worth worrying about. Cutting taxes means cutting government and council spending (I presume the green levy is to pay off past and future things like "free" insulation, wind turbines etc) which is fine if done properly but even George Osborne messed it up by making the cuts and letting the organizations do the legwork (so frontline services disappeared without touching managerial bloat) but every time a minister tries to do something he gets done over by his own civil servants. We could well end up as a failed state with a worthless currency if the government does not get a grip.

GingerTim

Here's what the government has told the Guardian about the £200 levy (not much, but some little detail):

https://www.theguardian.com/business/2022/feb/07/your-questions-about-changes-to-the-energy-price-cap-answered

Will there be any way not to take part in the government’s proposed council tax rebates and the £200 cut in energy bills to be repaid in the future, and just pay now? Ana, London

"The Treasury says this will not be an option – it says having an opt-out will complicate the process and delay money getting into people’s accounts. If you pay by direct debit this may not be an issue – you could make sure that don’t reclaim or run down any credit in your account so when bills go up to cover the £40 you will have the money.

It is not yet clear exactly how the energy rebate and repayment scheme will work but – probably because there are all kinds of potential problems around linking the clawback of the money to individuals or properties – the government has said it is expected to be through an increase in standing charges.

That option, which would add about 11p a day to standing charges, would mean for five years all brand-new energy customers would be paying for this year’s rebate.

If you are in the position where you can afford the £200 toward your bill now but are worried that you might struggle to pay £40 more over the next five years you could tuck away some cash now in a savings account to draw on at a later date. You won’t get much interest but as there is no interest on the loan that should not be too much of a concern."

MWT

GingerTim said:

That option, which would add about 11p a day to standing charges, would mean for five years all brand-new energy customers would be paying for this year’s rebate.

If you are in the position where you can afford the £200 toward your bill now but are worried that you might struggle to pay £40 more over the next five years you could tuck away some cash now in a savings account to draw on at a later date. You won’t get much interest but as there is no interest on the loan that should not be too much of a concern."

 I've not seen any details on the VAT treatment, so hopefully it is the same on the £200 as it will be on the 11p increase in standing charge, so both either including or excluding VAT...

Astria

cherrink said:

I have looked through a few posts and read the main article but there seems to be no mention of VAT on here. If they increase bills by £40 and that is VAT able then thats a really expensive loan frankly and people should be allowed to refuse.

I don't see how it turns it into a really expensive loan.

Your bill already includes VAT so it makes sense that the £200 will be a simple payment/reductions/however you see it from that figure.

Then you'll pay £167 + VAT back which will be £200, or close enough.

Even if VAT went upto 22.5% next year, that would equate to approx £4 extra.

 

badmemory

So at the end of the 5 years will that extra £40 come off the standing charge?  Answer I strongly suspect is not a cat in hell's chance.