UK to cut 5% electricity VAT for six months from Oct 1

Prime Minister Andy Burnham announced on Tuesday, July 21, 2026, that the government will remove the 5% value-added tax from domestic electricity bills for six months starting October 1. The move, which will apply regardless of a household’s tariff, is intended to provide breathing space amid the ongoing cost of living crisis.

The Treasury estimates the tax cut will reduce the annual Ofgem energy price cap by approximately £45 for a typical household, with suppliers expected to pass the saving directly to consumers. The announcement comes as households face persistently high energy costs following a £221 increase to the price cap that took effect on July 1, raising the annual figure to £1,862.

While consumer experts welcomed the measure as a positive step, many cautioned that its impact may be muted by underlying market pressures. Consumer champion Martin Lewis described it as a "good totemic step and very welcomed," but added that "in practice people won’t feel much benefit." He noted that current forecasts suggest the overall energy price cap could rise by around 3.1% in October, adding more than £50 annually to a typical dual-fuel bill, which would largely offset the VAT...