VAT is coming off electricity.
It is worth about £45.
Andy Burnham became Prime Minister on 20 July. His first cabinet meeting on 21 July announced that the 5% VAT on household electricity goes to zero from 1 October, for six months. Here is what that is really worth, and what it is not.
💷 The number
Zero VAT on electricity from 1 October 2026 to 31 March 2027. It applies to unit rates and standing charges, every tariff type, fixed and prepay included. England, Scotland and Wales. Not Northern Ireland.
For a typical price cap household that is about £45 a year, or roughly £20 over the six months it runs. Martin Lewis called it a 4.8% cut off all electricity bills, which is the honest way to say it.
Nothing to claim. It comes off automatically. Gas is not included.
🏛️ Who is running energy now
Miatta Fahnbulleh is the new Energy Secretary. She was the consumers minister before, which tells you where the focus is going to be.
Ed Miliband moves to the Foreign Office. The net zero targets stay. The person selling them changes.
Burnham said it plainly: a cost of living government. Expect bills, not turbines, in the speeches.
⚖️ What it does not do
It does not touch the thing driving bills up, which is gas. Wholesale gas prices are already climbing into the autumn and the October cap is expected to rise despite the VAT cut.
It is temporary. Six months, then it is back unless extended. Budget for £4 a month, not a windfall.
The bigger lever is still when you use electricity, not how much tax is on it. A household that shifts an hour of evening use into the afternoon can save more than £45 a year on a time of use tariff, and the grid will pay on top.
A £45 tax cut is a nice thing to receive. It is also the smallest number on your bill this winter. The market moved more than that while the cabinet was still sitting down.