Issued by: HM Treasury

Households will be better protected from rising global energy costs this winter after the Government cuts tax on household electricity bills from today.

• Removal of VAT from electricity bills starts today.

• Tax cut will help households with their energy bills by taking around £45 off the yearly Ofgem price cap.

• Part of Prime Minister’s wider plan for ‘everyday fixes’ to give families some breathing space.

Households will be better protected from rising global energy costs this winter after the Government cuts tax on household electricity bills from today.

The action keeps the Energy Price Cap £45 a year less than it would have been, giving people a bit of breathing space on their energy bills between October and December.

Around a third of households are on fixed tariffs and therefore will not be affected by the Energy Price Cap rise. The government expects suppliers to pass on the VAT cut to these customers too, meaning they could be in line for their energy bills to fall overall. The Government encourages people to shop around for the best deal for their home.

This is the latest measure in the Prime Minister’s series of ‘everyday fixes’ to give families room to breathe. It follows action to cap bus fares at £2, ban fake discounts and end subscription traps, as well as cracking down on school uniform-rip offs and cut business-rates for the pubs, social clubs and high-street businesses that hold communities together.

Prime Minister Andy Burnham said:

"For many families, the energy bill is the one they dread the most. I don’t accept that it has to be this way, and I am determined to bring down costs for good.

"But I know people can’t wait. Families need breathing space now.

"That’s why, from today, VAT is gone from your electricity bill. And we’re going further, capping bus fares at £2 from January and cutting business rates for pubs, social clubs and live music venues."

While the government is giving people short term relief on their energy bills, it is also taking action to fix Britain’s energy problems for the long term.

This week the Prime Minister committed to reduce energy costs so that they are in line with other countries in Europe within ten years by introducing greater public control in the system. He announced a new publicly owned body within Great British Energy - Great British Grid (GB Grid) - alongside other reforms to help improve competition, speed up grid connections for businesses, and lower costs.

It will help to reform the broken energy market so it better serves the public interest. Other measures include the delivery of Sizewell C to kickstart a golden era of nuclear, and investment in homegrown, clean energy production.

Chancellor of the Exchequer, John Healey MP, said:

"This tax cut will help keep energy bills down a bit as we head into the winter.

"We are acting on cost of living pressures to give people some breathing space for the next few months while we make long-term changes to better shield the country from global shocks like those we face today."

Secretary of State for Energy Security and Net Zero, Miatta Fahnbulleh MP, said:

"I know energy price rises weigh heavily on homes across the UK this winter.

"From today, our VAT cut will give households some much needed breathing space, making the energy price cap £45 a year less than it would have been. This follows the £150 of costs we removed from bills earlier this year.

"Alongside this, we continue to look at what more we can do to protect families from unaffordable bills, as we drive down bills for good through clean power."

Savings for households depends on how much energy they use, but the cut will help families keep more money in their pockets as temperatures fall and energy use typically increases.

The move follows a rise in global energy costs linked to the conflict in the Middle East and reflects the government’s commitment to give people some breathing space, taking practical action where it can make the biggest difference.

This builds on the £150 of costs taken off energy bills in the Budget last year and expansion of the £150 Warm Home Discount to around six million households. Our Warm Homes Plan will also lower bills for millions of households and help lift households out of fuel poverty.

More information

• An explainer on how the VAT cut works can be found here: Breathing space on your energy bill - GOV.UK [https://tinyurl.com/3y7jdxpw]

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