Qurexa Logo
Qurexa

Trust. Care. Deliver.

Back to Blog & Insights
Lifestyle

VAT came off electricity bills on Thursday. Here is what it is actually worth

Qurexa Editorial Team5 October 20267 min read 0 0
VAT came off electricity bills on Thursday. Here is what it is actually worth

What happened

On 1 October 2026, VAT was removed from household electricity bills in the UK. The Department for Energy Security and Net Zero announced it as the change took effect. The direct result is that the Ofgem energy price cap for October to December is £45 a year lower than it would otherwise have been. Ministers framed it as part of a wider set of changes. Around £150 of costs had already been taken off energy bills following last year's Budget. The Warm Home Discount, worth £150, has been expanded to about 6 million households. The 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." The Chancellor, John Healey, was more measured: "This tax cut will help keep energy bills down a bit as we head into the winter." Miatta Fahnbulleh, Secretary of State for Energy Security, said: "From today, our VAT cut will give households some much needed breathing space, making the energy price cap £45 a year less." The announcement placed the change alongside other measures described as "everyday fixes", including a £2 cap on bus fares and business rate cuts for pubs and social clubs. Longer-term plans mentioned include a Great British Grid within Great British Energy, and speeding up nuclear and clean energy projects.

Why this matters

£45 a year is about 86p a week. Nobody is going to feel rich. But two things make it worth understanding properly rather than dismissing. The first is that it arrives in October. Energy bills are not spread evenly across the year. Most households use far more electricity and gas between October and March, which is why the dread the Prime Minister described is seasonal. A reduction that lands at the start of the cold months is doing more work than the same reduction in June. The second is that it stacks. £45 from the VAT change, plus around £150 already removed from bills, plus a £150 Warm Home Discount for those eligible. For a household that qualifies for all three, the combined effect is in the region of £345 - which is a different conversation from 86p a week. The Warm Home Discount is the one most worth checking, because it is the largest single amount and it now reaches about 6 million households. Many people who have become eligible through an expansion like this do not realise it, because nothing arrives in the post telling them so. There is also a plain health reason to care. Cold homes make existing conditions worse - particularly heart, lung and joint problems - and the people most affected are often those least able to pay to heat them.

What the evidence actually says

Some care is needed with the numbers, because energy figures are easy to misread. The £45 is an annual figure applied to the price cap, not a discount on your next bill. The price cap sets a maximum unit rate and standing charge, not a maximum bill. If you use more electricity, you still pay more. The cap does not mean your bill is capped. This is the most common misunderstanding about the price cap, and it has been since it was introduced. It caps the price per unit of energy, not the total. The £45 applies to electricity, because that is where VAT has been removed. How much you personally benefit depends on how much of your energy use is electricity rather than gas. A household with an electric heat pump or electric heating will see more benefit than one heating with gas. "£45 a year less" is a comparison against what the cap would otherwise have been for October to December. It is not the same as saying bills are £45 lower than last year. Wholesale prices move independently of tax. And the Warm Home Discount is worth £150 to eligible households - it is not automatic for everyone. Eligibility rules apply.

Qurexa perspective

We deliver prescriptions and groceries across Lincolnshire, which means we see winter from the doorstep. Every year, the same pattern shows up: households that are cold, careful, and reluctant to say so. Two things we would gently flag, because they are genuinely in our area and we see them go wrong. First, medicine storage. If you are keeping a room cold to save money, check where your medicines live. Most medicines should be stored below 25C, which is rarely a problem in a British winter - but some, including insulin and certain eye drops and liquid antibiotics, must not freeze. An unheated back porch, a conservatory or an outside cupboard can drop below zero overnight. Move them somewhere that stays above freezing. If a medicine has frozen, do not use it; ask your pharmacist. Second, do not stop a medicine to save money. If prescription costs are the problem, there are legitimate ways to reduce them - a prescription prepayment certificate can cut the cost considerably for anyone paying for several items a month, and some people qualify for free prescriptions altogether. Ask any pharmacist. They will not judge you, and it is a conversation they have often. If getting to the pharmacy in bad weather is the barrier, that is what delivery services like ours exist for - ours or anyone else's.

Practical advice

Five things worth doing this month: 1. Check whether you qualify for the Warm Home Discount. It is worth £150 and now reaches about 6 million households. Contact your energy supplier or check the GOV.UK guidance. If you think you qualify and nothing has arrived, ask. 2. Join the Priority Services Register. Free, run by energy and water suppliers, and intended for people who are older, disabled, have a long-term health condition, or depend on electricity for medical equipment. It flags your household for extra help in a power cut. 3. Submit a meter reading. If you are on a non-smart meter, an accurate reading now means the new rate is applied to real usage rather than an estimate. 4. Do not switch blindly. Compare any fixed deal against the current cap level before moving. A fix is a bet on where prices go next. 5. Ask about help before you fall behind. Suppliers must offer support if you are struggling, and many run hardship funds. Citizens Advice gives free, independent help. Debt is much easier to deal with early.

What to know

VAT was removed from household electricity bills on 1 October 2026, making the Ofgem price cap for October to December £45 a year lower than it would otherwise have been. It sits alongside around £150 already taken off bills following last year's Budget, and a £150 Warm Home Discount now expanded to roughly 6 million households. Other measures announced in the same package include a £2 bus fare cap and business rate cuts for pubs and social clubs. The price cap limits the price per unit of energy, not your total bill - use more, and you still pay more. The VAT change applies to electricity, so households heating with electricity benefit more than those on gas. The single most valuable action for most readers is checking Warm Home Discount eligibility and joining the Priority Services Register. Both are free. Sources: Department for Energy Security and Net Zero, "Energy bill tax cut starts today to give families breathing space", 1 October 2026, https://www.gov.uk/government/news/energy-bill-tax-cut-starts-today-to-give-families-breathing-space ; Ofgem, "Energy price cap" consumer guidance, accessed 5 October 2026, https://www.ofgem.gov.uk/information-consumers/energy-advice-households/energy-price-cap ; Department for Transport, "Take off for passengers as government scraps extra charges when flying", 2 October 2026 (which also records the £45 VAT saving), https://www.gov.uk/government/news/take-off-for-passengers-as-government-scraps-extra-charges-when-flying This article is for general information and does not replace advice from a doctor, pharmacist or other qualified healthcare professional. For money and benefits questions, speak to a free service such as Citizens Advice.

#energy bills#vat#price cap#warm home discount#cost of living#winter

Related articles