The UK government announced the removal of VAT from household electricity bills starting 1 October 2026, saving an average of £45 per year for households. This follows earlier measures, including a £150 cost reduction from bills earlier this year. Around 6 million households will also receive the Warm Home Discount, providing an additional £150 off bills. VAT will no longer apply to electricity bills, including fixed tariffs, with suppliers adjusting charges accordingly. Pre-payment meter users will no longer face VAT on top-ups. Small businesses and non-domestic users already benefiting from reduced VAT rates will also see the 0% rate applied. The VAT cut is funded through the cancellation of the digital ID programme and will last for the 2026-2027 financial year. Eligibility for the Warm Home Discount and details on savings depend on individual supplier rates and usage.
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