Story perspectives

UK Cuts Electricity VAT, Saving Households £45 Annually

7/21/2026

Summary

Story summary

Prime Minister Andy Burnham announced that the United Kingdom will remove VAT from domestic electricity bills starting October 1, 2026.
The £1.8 billion saved by scrapping the Digital ID programme will finance the VAT exemption.
Treasury expects the change to lower the annual Ofgem price cap by about £45 per household.
Chancellor John Healey presented the policy alongside the Prime Minister.
The government will explore rent controls and a cap on bus fares.

History

Historical Context

After the 2018 Domestic Gas and Electricity (Tariff Cap) Act gave Ofgem authority to set a default-tariff price cap, the cap was raised in August 2022 to £3,549, a level that would have pushed 8.2 million households into fuel poverty. Government plans for a 2026 electricity-VAT cut seek to revive the earlier aim of reducing household energy costs.

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Story summary

Prime Minister Andy Burnham announced that the United Kingdom will remove VAT from domestic electricity bills starting October 1, 2026.
The £1.8 billion saved by scrapping the Digital ID programme will finance the VAT exemption.
Treasury expects the change to lower the annual Ofgem price cap by about £45 per household.
Chancellor John Healey presented the policy alongside the Prime Minister.
The government will explore rent controls and a cap on bus fares.

1 / 2