5% VAT to be removed from electricity bills from 1st October 2026

SnowMan

The current 5% VAT is going to be removed from electricity bills from 1st October in time to impact the next OFGEM price cap following this announcement.

https://www.gov.uk/government/news/new-pm-cuts-tax-on-household-electricity-bills-to-give-breathing-space-on-cost-of-living

The current 5% VAT will remain on gas bills though.

In relation to fixed tariffs that extend past 1st October the announcement says

The government expects all suppliers to pass the VAT reduction on to all customers, including those on fixed tariffs, as they did with the £150 of costs taken off energy bills announced at the last Budget

Please keep this thread factual and not political

Edit:

MSE news article now out on this

https://www.moneysavingexpert.com/news/2026/07/electricity-bills-vat-cut-martin-lewis-analysis/

QrizB

I just heard that reported on BBC2.

No doubt there will be an official MSE blog post and thread in due course, once the writers arrive at work!

SnowMan

I keep the gov.uk news and communications page bookmarked on my desktop and check in most mornings. So that's where I read it. You can choose all topics or just specific topics you are interested in.

It's a good source as an alert to things going on before they are spun and twisted on other news sites. Of course it itself reflects the spin of the government of the day but at least it is first hand information.

The_Green_Hornet

It looks like it is only funded for one year. From the announcement:

"This immediate action applies and is funded for this financial year."

prowla

If I was a cynic, I'd say that they'll probably put up the Standing Charge to offset it.

la531983

https://forums.moneysavingexpert.com/discussion/comment/82075978#Comment_82075978

Who do you mean by "they"

You do know the energy companies dont keep the VAT element for themselves dont you?

confused.com2

Saving the average household £45 a year! That will help us all massively! Wonder what the price cap will increase by come October?

ConcernedBrummie

Barely a scratch for those that need the support most unfortunately.

tiger70

£45 ? I've found more money down the back of the sofa this year . !!

bristolleedsfan

https://forums.moneysavingexpert.com/discussion/comment/82076005#Comment_82076005

New Chancellor has said funded from scrapping Digital ID, Outgoing minister D.J has said Digital ID was unfunded.

victor2

It's not much for the typical user, but every little helps, and there'd be so much uproar along the "heat or eat" line if VAT on gas was going up to 10%!