Life News
No VAT on electricity from October: about £45 off, but will a price cap rise swallow it?
Andy Burnham, Britain's new prime minister, has made scrapping VAT on household electricity his first cost of living move. Households in England, Scotland and Wales normally pay 5% VAT on power; from 1 October, the day Ofgem's next price cap begins, that falls to zero for six months, to 31 March 2027. Express & Star put the cost of the cut at £850m.
The Guardian said the government expects the change to reduce the annual price cap by about £45 for a typical home. Because VAT is charged on units used as well as the standing charge, heavy users gain most, including homes heated by electricity and owners of electric cars and heat pumps. Gas is not included, and Northern Ireland keeps 5% VAT under post-Brexit rules, though Stormont will get funding instead.
MoneySavingExpert said Martin Lewis welcomed the move as a "good totemic step" but warned that most households will not feel much difference: a forecast October cap rise could wipe out the saving for many on standard tariffs. Twelve of 19 suppliers it contacted confirmed they will pass the cut on, including to fixed deals.
“It is not a trivial distinction.” — Adam Scorer, National Energy Action, on gas-heated low-income homes, via The Guardian
How each outlet framed it
- The Guardian — who benefits: electric heating and green tech users more than gas-heated homes.
- MoneySavingExpert — will you notice it: symbolic, but likely eaten up by the next cap rise.
- Express & Star — the headline cost: an £850m cut.
What we don't know yet: The size of October's price cap change, which Ofgem had not announced, and how the funding for Northern Ireland will work.