{"id":123259,"date":"2026-07-21T11:30:11","date_gmt":"2026-07-21T10:30:11","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=123259"},"modified":"2026-07-21T11:28:23","modified_gmt":"2026-07-21T10:28:23","slug":"andy-burnham-unveils-surprise-vat-change","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/andy-burnham-unveils-surprise-vat-change\/","title":{"rendered":"Andy Burnham Unveils Surprise VAT Change That Could Reduce Energy Bills This Winter"},"content":{"rendered":"\n

The tax reduction will cut the VAT rate on domestic electricity from 5% to 0%<\/strong> and is intended to provide short-term support as households continue to face pressure from energy costs. According to the Prime Minister\u2019s Office, the policy will apply for the current financial year and is expected to cost around \u00a3850 million in 2026-27.<\/p>\n\n\n\n

Burnham announced the move on his second day as prime minister, saying the government was taking \u201cimmediate action\u201d to reduce energy bills and give families \u201cbreathing space\u201d with the cost of living.<\/p>\n\n\n\n

Government Says Electricity Tax Cut Will Support Households This Winter<\/strong><\/h2>\n\n\n\n

The VAT reduction will be reflected in the next Ofgem price cap period, which begins in October<\/strong>. Energy suppliers are expected to pass the reduction on to customers, including those on fixed tariffs, following the approach used for previous reductions in energy charges.<\/p>\n\n\n\n

According to the government announcement<\/a>, the measure will also benefit some small businesses that qualify for domestic energy VAT relief, as well as charities and residential care homes eligible for the reduced rate.<\/p>\n\n\n\n

The government said the policy would be funded through the cancellation of the Digital ID programme<\/strong>, which had been expected to cost \u00a31.8 billion over three years. Officials said savings from that programme would be redirected towards the electricity bill reduction.<\/p>\n\n\n\n

Chancellor John Healey<\/a> said the measure would provide reassurance for families during the winter period. He added that the reduction would also help lower inflation, with government estimates suggesting it would reduce the consumer prices index measure by around 0.10 percentage points.<\/p>\n\n\n\n

The policy follows previous government action on energy bills, including a \u00a3150 reduction announced in an earlier Budget. The new administration said the VAT <\/a>cut would provide support across households rather than targeting only specific groups.<\/p>\n\n\n\n

The move will not directly apply to Northern Ireland<\/strong> because electricity VAT arrangements are linked to EU rules following Brexit. According to the government, the Northern Ireland Executive will receive comparable funding to provide equivalent support for households.<\/p>\n\n\n\n

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The new government is taking immediate action to give people some breathing space on the cost of living.

From 1 October, VAT will be removed from domestic electricity bills – helping households with energy costs this winter and funded within existing budgets. pic.twitter.com\/OCiAIUXb9Q<\/a><\/p>— HM Treasury (@hmtreasury) July 21, 2026<\/a><\/blockquote>