{"id":126006,"date":"2026-09-27T07:30:00","date_gmt":"2026-09-27T06:30:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=126006"},"modified":"2026-09-27T02:13:19","modified_gmt":"2026-09-27T01:13:19","slug":"energy-bills-set-for-major-vat-shake-up","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/energy-bills-set-for-major-vat-shake-up\/","title":{"rendered":"Energy Bills Set for Major VAT Shake-up From October 1 Under New Government Plan"},"content":{"rendered":"\n

The change comes as the government prepares for its first Budget under Chancellor John Healey, with borrowing pressures and possible tax changes dominating political debate ahead of the 28 October announcement.<\/p>\n\n\n\n

The VAT reduction was announced in July, shortly after Andy Burnham became Prime Minister. According to the Manchester Evening News<\/strong>, the measure is expected to save households an average of \u00a345 a year, although the actual saving will depend on electricity prices set by suppliers and individual consumption.<\/p>\n\n\n\n

Energy VAT Cut Introduced as Ofgem Raises Price Cap<\/strong><\/h2>\n\n\n\n

Under the current system, energy suppliers apply 5% VAT to electricity usage and the daily standing charge included on household bills. From October 2026, this requirement will be removed, meaning households will no longer pay VAT on those electricity <\/a>costs.<\/p>\n\n\n\n

The policy was introduced as the government attempts to respond to higher energy costs<\/strong>. According to the Manchester Evening News<\/a>, regulator Ofgem raised its energy price cap by 4%, taking the average annual bill for a household using both electricity and gas to \u00a31,723 if sustained for a year.<\/p>\n\n\n\n

Ofgem attributed the increase to higher wholesale gas prices linked to instability in international markets. The regulator said the rise represented an increase of \u00a360 a year for the average household.<\/p>\n\n\n\n

Announcing the VAT change, Andy Burnham<\/strong> said the government wanted to provide households with \u201cbreathing space\u201d by reducing energy bills and putting more money back into people\u2019s pockets.<\/p>\n\n\n\n

The measure has also received criticism from some economists. According to the Manchester Evening News, Martin Lewis, founder of MoneySavingExpert, described the VAT reduction as a welcome step but said that many people would not feel a significant effect in practice.<\/p>\n\n\n\n

Helen Miller<\/strong>, director of the Institute for Fiscal Studies, questioned how the government would fund the policy after its first year, arguing that reversing the change could create difficulties in future budgets.<\/p>\n\n\n\n

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The cost of living is the biggest concern for constituents in Portsmouth.

It's why it's so important @andyburnham<\/a> has acted in his first 2 months to give people a bit of breathing space:

\u2705 Scrapping VAT on electricity
\u2705 \u00a32 bus fare cap
\u2705 Ending subscription traps

Find out\u2026 pic.twitter.com\/ufdMknzLen<\/a><\/p>— Stephen Morgan MP (@StephenMorganMP) September 25, 2026<\/a><\/blockquote>