Electricity bills to fall £45 this autumn thanks to VAT cut

Expert tips to keep your energy bills in check
Sarah IngramsPrincipal researcher & writer

With over 10 years’ experience writing about consumer affairs, Sarah leads on energy content at Which?, helping customers navigate the market and exposing poor practice.

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Electricity bills will have VAT removed from 1 October, saving households around £45 a year, new Prime Minister Andy Burnham announced this morning.

The government hopes that the tax cut will impact the next energy price cap, which will change on 1 October.

Before the announcement, the autumn price cap was expected to stay at a similar high level to the current one.

VAT on electricity bills is currently 5% and will be cut to 0%.

Find out how to get the best energy deal.

How do I get the £45 electricity bill cut?

You don't need to do anything. Energy suppliers in England, Scotland and Wales are expected to pass on the VAT reduction to all their electricity customers.

This applies whether you're on a price-capped tariff or a fixed tariff (which wouldn't usually change price during your contract).

It will be applied from 1 October and is funded for this financial year, which ends on 31 March 2027.

In Northern Ireland, the NI Executive will get comparable funding to support households with the cost of living.

What will my energy bill cost this autumn?

A typical gas and electricity bill is expected to cost around £138 a month between October and December, according to the latest prediction by industry expert Cornwall Insight.

That works out as £65 a month on gas and £73 on electricity.

Overall, it's around £1 cheaper per month than the current price-capped rates.

VAT is currently charged on both fuels and will be removed from electricity only, saving a typical household around £3.75 a month on electricity (based on the government's £45 saving).

These figures are all based on a household using a medium amount of gas and electricity. This is set out by Ofgem as 2,500kWh electricity and 9,500kWh gas a year.

If you use more or less electricity or gas than this, then your actual bills will look different.

Find out what the energy price cap is, including the exact rates per day and per kilowatt hour of power.

Tips to save money on gas and electricity

If you're currently paying price-capped rates, compare energy prices using our free tool to see whether you could save money by switching to a fixed-term tariff. 

When we last checked, a typical household could save around £200 a year.

Already fixed a cheaper deal? Try these:

  • Use eco settings on your appliances where available.
  • Do laundry at 30°C and dry it outside if possible.
  • Fit an eco shower head to cut your hot water use (and the energy used to heat it).
  • Pay by direct debit – this is usually the cheapest option with a greater choice of tariffs.
  • Send your supplier regular meter readings – or check that your smart meter does – so you only pay for what you use.

See more money-saving tips among 10 ways to save on energy bills. 

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