The UK government removed VAT from household electricity bills from 1 October 2026, HM Treasury announced that day. According to the department, the measure keeps the Ofgem Energy Price Cap around £45 a year less than it would otherwise have been for the October to December period.

Around a third of households are on fixed tariffs and so are not affected by the price cap rise, the government said. It added that it expects suppliers to pass the VAT cut on to these customers as well, which could mean their bills fall overall. The government said savings depend on how much energy a household uses, and encouraged people to compare deals.

Prime Minister Andy Burnham said VAT was gone from electricity bills from that day, and set out a plan to cap bus fares at £2 from January and cut business rates for pubs, social clubs and live music venues. He also said he had committed to bringing UK energy costs in line with other European countries within ten years, including through a new publicly owned body within Great British Energy, Great British Grid. Chancellor John Healey and Energy Secretary Miatta Fahnbulleh also commented. The government linked the move to a rise in global energy costs connected to conflict in the Middle East.