You’ve most likely seen in the news that the government will be cutting VAT on electricity bills from 1 October and wondered what difference it will actually make to your bill. Here’s a simple breakdown of what’s changing, how much it’s worth, and how Utilita can help you further reduce your energy costs with our energy saving campaigns.
What is the VAT cut on energy bills?
On 21 July 2026, the government announced that VAT on domestic electricity bills will drop from 5% to 0% from 1 October 2026, as part of the new Prime Minister Andy Burnham’s pledge to help UK households through the cost-of-living crisis. This is a temporary change, running until 31 March 2027.
This VAT relief will only be applied to electricity bills, with VAT on domestic gas staying at the current 5% charge. If you have a dual fuel account, you’ll see this reduction on the electricity side of your usage, not the total bill.
The change will apply in England, Scotland and Wales; Northern Ireland is being handled separately, with the Executive receiving equivalent funding to support households there.
How much is VAT on energy bills, and what will you save?
Domestic energy has been charged at a reduced VAT rate of 5% for several years – not the standard 20% you pay on most things. From 1 October, electricity will move to 0%.
The government estimates a typical household will save around £45 a year, based on Ofgem’s Energy Price Cap. But as always, your own savings depend on how much electricity you use.
Do you need to do anything to get the VAT cut on energy bills?
No. VAT will be taken off automatically by your energy supplier. There’s nothing to claim, no form to fill in and no need to switch tariff – the government has said the saving should be passed on to everyone, including people on fixed deals.
Will the VAT cut on energy bills actually lower your costs?
Ofgem will confirm its next price cap on 26 August, covering October to December 2026. Independent forecasters including Cornwall Insight expect the cap to rise this autumn on the back of higher wholesale gas costs due to conflict in the Middle East, which could offset much of the £45.
Money coming off an energy bill is welcome. But at Utilita, we’ve been clear that VAT relief on its own isn’t the most targeted way to reach the households who need help most.
Our recent Fairer Energy report sets out where the money in your energy bills currently goes and proposes a different use for the VAT collected on electricity and gas. Instead, these funds could help finance an improved and reformed Warm Home Discount (WHD). Around £2.5 billion could be redirected in this way and, by removing WHD costs from energy bills, eligible households could save up to £450 a year.
We’re also calling for policy costs to be reviewed and moved into general taxation and for network upgrades to be funded through government bonds rather than added to your bill. You can read the full case in our Fairer Energy report.
How is Utilita helping you save beyond the VAT cut on energy bills?
As well as campaigning for a fairer energy system for our customers, we’ve also spent years helping millions of households across the UK cut what they spend on their energy through our energy saving campaigns.
Utilita High 5 gives you five simple, free tips to change the way you use your energy at home, including keeping showers to 4 minutes or avoiding standby on your gadgets. Follow them all year round, and you could see yourself saving up to £7491 – just for being a little more energy efficient.
Power Price List is the world’s first breakdown of what common household appliances actually cost to run – per minute, per cycle, per average use, and on standby. It’s the quickest way to spot which appliance is quietly costing you the most and make changes at home.
My Utilita puts your energy usage in your pocket, with Smart Score giving you a personalised read on how efficiently you’re using energy and quick tips to help you improve along the way.
Get face-to-face support on the high street with Utilita Energy Hubs
We’re one of the few energy suppliers who can actually look you in the eye and offer real-time, helpful energy-saving advice. With 12 hubs across the country, our Energy Experts are on hand to talk you through your energy account and support you in making even more savings on your energy use at home – as well as help you top up and check whether you’re eligible for support schemes.
You’ll also find affordable energy-efficient products in store, from light bulbs to air fryers, plus Community Rooms that local groups and charities can book for free. And get this, you don’t even need to be a Utilita customer to use them.
What happens next with VAT on energy bills?
The VAT change lands on 1 October, and Ofgem confirms its autumn price cap on 26 August – so you’ll have a clearer picture of your winter costs by the end of summer.
In the meantime, check out our Power Price List to see what your appliances are costing you, try this summer’s Utilita High 5 tips, or pop into your nearest Energy Hub for a chat about how we can best support you with your energy.
1 ↩ All energy usage data is based on Energy Saving Trust Infact Report (September 2019 / June 2021) and Utilita’s Review of the Energy Cost of Cooking (September 2022). All energy costs are based on the Government Energy Price Cap (July 2026). Savings may vary as many factors will be important in determining your actual savings.