The UK Government’s VAT cut on domestic electricity has come into effect today (1 October), delivering a saving of around £45.
Suppliers are expected to pass on the VAT cut, which will be cut from 5% to 0% until 31 March 2027.
It comes as the Prime Minister announced this week plans to reduce energy costs to the level of other European countries, through greater public control in the system. He also announced a new publicly owned body within Great British Energy – Great British Grid (GB Grid).
The new VAT cut is alongside the £150 of costs taken off energy bills in the Budget last year, and expansion of the £150 Warm Home Discount to around six million households.
But the move has been criticised by the EV charging sector, who have highlighted that the VAT cut has reinforced an even greater disparity with public charging costs, which are priced at 20% VAT.
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, and I am determined to bring down costs for good.
“But I know people can’t wait. Families need breathing space now.
“That’s why, from today, VAT is gone from your electricity bill. And we’re going further, capping bus fares at £2 from January and cutting business rates for pubs, social clubs and live music venues”.
Chancellor of the Exchequer, John Healey MP, said:
“This tax cut will help keep energy bills down a bit as we head into the winter.
“We are acting on cost of living pressures to give people some breathing space for the next few months while we make long-term changes to better shield the country from global shocks like those we face today.”
Secretary of State for Energy Security and Net Zero, Miatta Fahnbulleh MP, said:
“I know energy price rises weigh heavily on homes across the UK this winter.
“From today, our VAT cut will give households some much needed breathing space, making the energy price cap £45 a year less than it would have been. This follows the £150 of costs we removed from bills earlier this year.
“Alongside this, we continue to look at what more we can do to protect families from unaffordable bills, as we drive down bills for good through clean power.”
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