Electricity VAT to be scrapped for six months from 1 October

Farway

https://forums.moneysavingexpert.com/discussion/comment/82077711#Comment_82077711

And also just about everyone uses electricity, but a lot of people do not use or have gas. So a cut in Leccy is useful to most

Scot_39

https://forums.moneysavingexpert.com/discussion/comment/82077556#Comment_82077556

It depends - at that level on pure electric you still save.

But at that level on dual fuel - and the 3% applies to both fuels you could well see a lower than otherwise gain - as the 5% only applies to electric - but never a loss on the what would have been without the change - from the change.

(Last 2 cap rises havn't been that equal - thanks to govt / Ofgem changes and Iran - July was more like 6% electric /25% gas iirc - worse on ave gas unit rate iirc c27.7%)

Single Fuel

Using a £1000 per fuel ex VAT to keep maths simple

£1000 was billed as £1050

With no rise - to be billed at £1000

If you currently paid exactly £1000 inc VAT - then that was actually a pre VAT £952.38 - so a £47.62 saving (4.76%). You dont save quite the full 5% or £50 (its a 1/1.05 reduction factor)

But the 3% (where did you get that figure ? total or per fuel split ?)

So again take the £1000 ex VAT baseline

£1000 ex vat becomes £1030 ex VAT - and with no VAT = £1030 billed - so a real £20 pa saving.

Over 6 months of winter inc all electric heating say - so 60-75% use in winter - funded so far (the future funding not the extension in doubt AFAIK) if lucky £12-15.

Without the VAT change of course worse

£1000+3% = £1030 + 5% VAT = £1081.50 - £51.50 higher

But for dual fuel yes it's messier

If take hypothetical equal split - so £1000 ex vat for both fuels

currently thats £1050+£1050 billed £2100

the 3% with the electric VAT change - if 3% applied equally -

£1000+3% = £1030 +5% vat=£1081.50 gas (up £31.50) + £1030 no VAT electric (down £20) = £2111.50 - so £11.50 more - 0.55% increase

but still again better than before no VAT change as 3% without it

£1030+5% vat + £1030+5% vat = £2163 - a straight 3% increase

£2111.50 vs £2163 = again still a £51.50 saving.

You could work it out by percentage rise and your personal gas / electric percentage split - but its impossible to know what the next 4 weeks is going to do to Ofgem SVT cap prices for Oct - or new fixes. With gas now once again pushing 150p/therm - up another c4% today - and 50% on post MoU lows just a few weeks ago

JKenH

Having solar panels, I use very little electricity in summer but will use much more in winter (and being on a ToU tariff will stray onto a much higher rate) so the choice of October to March works very nicely for me. The greatest benefit is to those with high electricity consumption such as heat pumps, EVs and swimming pools and it isn’t particularly well targeted. Of course what HMG doesn’t collect in VAT will have to be collected in other taxes just like the £150 reduction on our bills from moving legacy green levies and social costs.

It is worth bearing in mind that as unit electricity costs increase our consumption falls and therefore the typical domestic consumption value used by OFGEM to calculate the price cap falls and, hence, so does the price cap. The TDCV used to be 3100 KWh but over the last 6 years it has been reduced by almost 20% to 2500kWh. If the TDCV value hadn’t fallen the OFGEM price cap (based on using the same amount of electricity as we did 6 years ago) would be 24% higher than it is. Using the 2019/2020 TDCV values of 3100 for the electricity element of the price cap would have seen the price cap rise from around £550 in 2020 to £1080 today. In other words domestic electricity costs have almost doubled.

To produce real savings we need the wholesale cost of electricity to be brought down. Moving costs from bills to general taxation is just smoke and mirrors. (This is not intended as a criticism of any particular political party; it is now the standard behaviour of all governments).

Chrysalis

https://forums.moneysavingexpert.com/discussion/comment/82077643#Comment_82077643

I never said a poor person should get less support.

Honestlen

https://forums.moneysavingexpert.com/discussion/comment/82076630#Comment_82076630

Hi all .

The saving for me a ( very frugal state pensioner) is a whopping £7.92 over the 6 months. Sarcastically what a difference. I might treat myself to a coffee.

QrizB

The saving for me a ( very frugal state pensioner) is a whopping £7.92 over the 6 months.

@Honestlen If your saving is £7.92, you're only planning to spend £158+VAT on electricity over those 180 days. 88p a day, or thereabouts, which (for someone on the SVT or a conventional fixed tariff) is less than 2kWh per day plus standing charge.

I can see how that might be possible, and I suspect it puts you in the bottom 5% of electricity consumers.

Have you considered asking to join to one of the "low standing charge" trials that the larger energy companies have launched recently? That could save you much more than the VAT cut does.

Edited to clarify following gpman's query below.

bristolleedsfan

Incredible, above Coffee link increased in price from £6 to £7.90 within hour of being posted.

QrizB

https://forums.moneysavingexpert.com/discussion/comment/82078655#Comment_82078655

Still showing as £6 for me. (If your post was a humourous one, sadly it went way over my head!)

bristolleedsfan

https://forums.moneysavingexpert.com/discussion/comment/82078661#Comment_82078661

Cleared cookies and reloaded the webpage

debitcardmayhem

In the app here £6