The Department for Energy Security and Net Zero said in a news story published on 26 August 2026 that VAT would be removed from household electricity bills from 1 October 2026, saving households an average of £45 per year. The department said the measure had limited the rise in Ofgem's energy price cap and followed £150 of costs removed from bills earlier in the year.

According to the department, the change would apply automatically, including to fixed tariffs already locked in, and would also cover top-ups on pre-payment meters. It said small businesses, charities and residential care homes already qualifying for the reduced 5% VAT rate, including through the existing certificate and declaration process, would also benefit from the 0% rate that winter.

The department said the cut had been funded for the 2026 to 2027 financial year through cancellation of the digital ID programme. It also said around 6 million households were eligible for the Warm Home Discount that winter, providing a further £150 off electricity bills. Savings would depend on supplier prices and usage, it added.